When Build Startup, Better Bootstrap or Equity Funding?


Building startup is not easy. Many factors must be considered, one of them regarding capital.

Capital (money) in setting up startup is significant. Usually, the startup does not directly get profit, so need significant capital for a startup can ‘survive.’

The ‘long-term’ nature of the business startup, making money the most important in developing the business.

Talk about capital in build startup – usually, there are two types of founders, namely:

1. Bootstrap founder

Founders of the bootstrap type, usually have the idealism that they do not want to ‘rely on money from investors.’ The founder prefers to use his own money to finance startup operations and survive in the ‘uncertain’ business world.

Although initially bootstrap, not a few founders who eventually depend on the founder. The reason is that he runs out of money and ‘no other choice’ in maintaining startup business that has been pioneered with difficulty. So lobbying investors is a MUST step.

2. Funding from investors

This one founder has a goal to get investor funding. So lure investors already from the beginning is in their business plan (to get significant capital).

Initially, the founder set up a startup with bootstrap (to build a business foundation). After the business had been built, the founder lobbied some investors – to get funding. In the end, it is the investor’s capital that becomes the ‘startup’ motor – to ‘survive.’

Which one is better, run a startup with own capital (bootstrap), or investor’s capital?

If you are setting up startup, then you should be able to choose between ‘bootstrap or using investors’ funds. For your consideration, please see the following:

• If you have enough money, then do bootstrap until you fund. The next step, you can choose between persisting by lobbying investors, closing your startup (bankruptcy), or ‘selling’ your startup (acquired by others).

• If your startup has a business model that can run immediately and profitably, then bootstrap is the right choice. However, you must have your capital to not depend on investors.

• If your goal is to build a startup to target as many users as possible, then seek an investor immediately. You will need substantial funds to acquire users, while your ‘business’ has not run fully (not yet earned).

• If you build a startup with bootstrapping, then if your startup gets a nice income – all for yourself. Conversely, if your startup suffers a loss – then the loss becomes your own expense.

• If you build a startup with investor funds, then you should be willing to share ownership (shares) with them. If the startup valuation increases, profit will be divided with the investor. Conversely, if a loss occurs – you are not alone to bear the loss.

My humble opinion

If I were a startup founder, then my choice would be to run it with BOOTSTRAP.

What is the reason I chose bootstrap?

The answers are:

1. So that the startup business that I run more efficient and effective (because I use my own money). If I use ‘big money’ from investors, it will cause waste (burn money).

2. With bootstrapping, at least there will be no pressure from other parties (investors) when I run the business. Everything is driven by one’s own will, one’s strategy, and self-indulgence (no intervention from the other side).

3. If my bootstrap startup runs out of money, then the step I take is to sell the startup (acquired by others). If no one wants to buy, then I let the business is considered bankrupt.

Establishing startup (read: ‘uncertain business’) is not as easy as building any other business.

The dynamic nature of the digital world, making startup’s existence easily replaced by new startups will continue to exist.

Therefore, money is very important – so that this business can survive.

The question now, which one would you choose? Set up startup with own capital, or with investor funds?

Please provide your answers in the comments box!

(Source: onlenpedia.com, edited by Ajie Fabregas)

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