Bootstrap first then VC finance

Filed in archive Bootstrapper Tips on November 10, 2007

An article last week in the Toronto Gazette reinforced an idea that commonly comes up in conversations on bootstrapping.

In Canada as here in the States, it's better to bootstrap to get your business up and running and then later look for Venture Capital or other outside funding once you've got some sales and a working business model under your belt.

Whatever gripes young business pioneers have about VCs, Angela Burlton, a professor of entrepreneurial studies at McGill University, wants them to know it's all optional.

"People think they need VCs to start a business. They don't," she said.

Instead, Burlton tells entrepreneurs they'd be better off bootstrapping it until they start making some sales. Then when they approach VCs for growth money, they won't have to give up a majority stake.

James Hong of Hotornot.com explains how he and brother Jim founded their company using lots of creative means to get around their lack of financial backing.

The Gazette article suggests:

Early seed money is also hard to come by, as VCs normally turn their noses up at deals below $1 million.

And fellow bootstrapper and blogger Ben Yoskovitz of the Instigator Blog told the paper:

They all say they want to get into early stage financing, but few are actually doing it.

If you've got a great business idea consider how you might bootstrap it first without any outside funding. If you do decide to get outside investors in the future, it will be much easier to persuade them with a record of revenue and a working business to show off.