Entrepreneur, consultant and blogger Tim Berry writes this post about the troubles with interesting Venture Capital firms with that first start-up and suggests bootstrapping as one option to get around the obstacles-at least in the beginning.

Though he too eventually sought VC funding for his company RightNow Technologies, bootstrapping guru Greg Gianforte, in his "eight solid reasons why Bootstrapping will consistently deliver better results" (then seeking outside investment immediately), gives these thoughts on the downside of starting with VC investment:


1. Venture capital firms might take up to a year or more to decide on whether to invest.

Berry adds:

Build the sales, make it happen, don't worry so much about what "Mr. Yahoo" got. Go get your own without having to convince Venture Capitalists. Just convince users.

2. Venture Capitalists:

...might want a 200-page business plan.

(Debate about the need for a traditional business plan before actually developing a business model can be found here.)

3. Their funding requirements might force you to spend up to $50,000 in professional fees. (Ouch!)

4. Venture-funded entrepreneurs spend an inordinate amount of time trying to find sources of external funding-while Bootstrappers are already on the street looking for customers and closing deals.

5. When Bootstrappers succeed, they get to keep their winnings. Some can even pass them along to their children. In a VC-backed company, on the other hand, you have to have to achieve a tremendous amount of growth to profit personally-since you have to fulfill your investors' ROI expectations first. In fact, once you're addicted to external financing, you can see your shares totally diluted by subsequent rounds of funding. So you can wind up with a successful business and little personal financial gain to show for it.

6. Venture funding actually encourages the start-up to waste money long before a viable business has been established. In a Bootstrapping model, on the other hand, waste simply can't occur because there is nothing to waste.

7. Because they don't have huge amounts of cash, Bootstrappers can't make the kinds of huge mistakes that often destroy venture-funded companies it.

Finally, Berry, who apparently built his own software company from 0 to 40 employees and a 70 percent market share without outside investment suggests:

The best revenge is living well. Forget the VCs... make a ton of money and then tell stories about how you did it without them.

My sentiments exactly!