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Bootstrapped vs VC funded. What do you choose and why?
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I think it is about Time Vs. Money.
No product can beat market readiness to become successful. If you think your market is ready and you don't have enough time to build the product, then you need a lot of money and VC route will fit well. If you think the market is not ready yet but it will eventually arrive at your solution in future, then bootstrap seems logical. There are exceptions to both scenarios and timing the market is a tough call.
It depends on many factors. Some of them include
1)Product - Does it have a high gross margin? Is it in a winner take all market?
2)Personal Ambition - Do you want to build an only Billion Dollar Company? or a Sustainable Life Style Business?
If the product is in a winner take all market and it has low gross margins, it is very difficult to build without raising money as the competitors with VC funding might raise more money and can beat you. Most products that require network effects come in this category. Ex E-commerce marketplaces, Hyperlocal grocery marketplaces, etc.
If the product has high gross margins and is not in a winner take all market, it's possible to build both lifestyle businesses and large companies without raising VC money Ex: SAAS, a Few D2C brands, etc. It boils down to personal ambition.
There might be many other factors and at the same time, there are always exceptions.
For me it is rather a question whether you can afford bootstrapping. If yes, I would go for the that. Nonetheless, VC money can provide you with access, media attention, etc. as well as speed up things.
@matcha_anil @matthias_strafinger How do you manage teams, their expectations and long term commitment when the funds are limited?
@dipak_sisodiya I prefer ESOPs towards LT commitment and goal alignment.
In the beginning I would go with bootstrapping. Once the business grows I will look for VC funds for increasing the growth rate.
Bootstrapping ... because fund raising is a full time activity and didn't fit into our scheme given our tiny team size. It was important for us to focus on product and market.
Currently don't have a choice :) but i think VC gives you the ability to scale significantly faster. Where i've spent 1 year on development time, i believe being VC funded we could have been where we are now 4-6 months in!
I prefer bootstrapped, I don't like having to do reports to anyone (only for my team) or hear advice from people who are not present in the company
I think both have their own merits. Different use cases require different things.
@matcha_anil both have their own benefits. In bootstrap, the founder is always king. Being VC backed doesn't gurantee this but it'll give you the chance to grow faster, and take exit faster as well. But there are always some exceptions.
Evoke