Fund raising is a challenging job after setting up a business. Choose better option, take the help of Bootstrapping vs venture capital article.
You say you have a great idea that can strike it big? Something that will have users and followers soon? Hmm. But do you have the cash to start it off? Well, don’t fret if you don’t – there are many ways of raising funds for exciting new business ideas like yours. The main ones that are very popular these days are bootstrapping and VC funding. But which one should you opt for? Let’s look at both these methods and see which one – Bootstrapping vs Venture Capital – is best for you!
In bootstrapping, you seek out an initial amount of seed capital at the most, but really, launch your business with your own money and investment. Bootstrapping is best suited for ‘smaller’ or mid-sized business run by a single owner. This gives you complete control of your business, allows you to keep the profits, and teaches you the basics of running your own company. There are, however, some disadvantages inherent in the bootstrapping funding method. The primary ones are: You have to do most of the management work yourself as there is rarely any support from your investors. If your business goes through a rough patch, you are pretty much on your own as you don’t have access to extra funding to help you out.
Venture Capital – or VC funding – is one of the most popular methods of starting a new business. In this method, you take on investors who provide you funding, in return for a share in the business. VC funding is best suited for ideas that possess greater potential and may also require a larger amount of seed capital.
This is also the best for any business ideas that might be risky! Some of the advantages of opting for VC funding are: You benefit from the business expertise of the VC; you can seek out additional funding if the original capital falls short; you have access to the VC’s vast network and resources. However, as with bootstrapping, there are certain disadvantages to opting for VC funding.
The main one is that you have to give up some control of your business. As the VC is giving you funding, they will take a share in the business. And just as you gain from their expertise and experience, there are times when the VC may overrule your ideas! VC funding also takes a long time to arrange as you will have to persuade the VC as to why your ideas is viable and why they should trust you with their money.
Overall, VC funding can be very useful if the capital required is large and you don’t mind giving up some control of your business. Now, looking at these comparisons between VC funding and bootstrapping, I’m sure that you’re well-placed to decide what your chosen route should be!