NewsStartups

Bootstrapping vs. Seeking Funding: Choosing the Right Path for Your Startup


Start your company without outside investment? Absolutely. In fact, many successful companies like Kilo Health have done just that. However, seeking funding is also an option that can be more compatible with your goals.

But before you make a decision, it’s important to weigh the pros and cons of both approaches. This article will guide you in choosing the right path for your startup.

Bootstrapping

Before deciding on a path, it’s crucial to understand what a bootstrapped company is. Bootstrapping involves building a business from the ground up, either without seeking external investment or with minimal external capital.

Seeking funding involves raising money through outside investment, with investors exchanging capital for equity or partial ownership of the company.

Keeping this in mind, you need to consider your personal goals. But, if you choose to bootstrap your company, it can be more risky, but you’ll have more control and gain all the revenue and rewards.

Vilius Cesnauskas, the Chief Business Development Officer at Kilo Health, describes it this way:

“Bootstrapping raises financial risk by limiting a company’s ability to handle unexpected expenses and necessitates while working with restricted resources. Nonetheless, the accomplishments will be only yours to celebrate.”

A well-known case of a bootstrapped business is Jeff Bezos starting Amazon.com right out of his garage with just a small team.

Seeking funding

Do you want to grow your business quickly? Then seeking investment would be the right choice. As Vitalijus Majorovas, the co-founder of Kilo Health’s Co-found Program, explains:

“Back in October 2021, we started our company. In that same year, we secured funding to create a prototype of a vagus nerve stimulator, and we did so in just two months (if you’re not up to speed with timelines, this is practically a miracle).

Our whole journey unfolded over a mere 9 months – from brainstorming the idea, and crafting a physical product, to getting those initial sales. To put things in perspective, the usual timeline for developing hardware spans about 3 years.”

Now, if you’ve decided to seek funding, you need to do your research. There are quite a few options to choose from. Including:

    • Angel investors: Individuals who offer investment to businesses in exchange for convertible debt or ownership equity.
    • Venture capital: Firms that invest in startups with an expectation of high growth in exchange for equity.
    • Co-found Programs and Accelerators: These programs, like the one offered by Kilo Health, offer funding, resources, and mentorship in exchange for equity. They help ensure that the business thrives overall.
  • Strategic partnerships: Collaboration with successful businesses in which they share resources and their distribution channels as well as capital, and may require joint ventures.
  • Revenue financing: startups can sell future revenue percentages to investors, but the investors must believe in the growth of the company.

Pros and cons

Choosing between bootstrapping and seeking funding for your startup requires careful consideration. 

Bootstrapping a company gives you greater control, and makes starting a business easier since you don’t need to convince investors, saving time you might spend on presentations and pitches. Additionally, bootstrapping naturally lowers expenses

Bootstrapping offers full control and profit retention but comes with limited resources and potential burnout. On the other hand, seeking funding accelerates growth, provides expertise, and opens networking opportunities but entails a loss of control, pressure for quick returns, and equity dilution.

But don’t forget that seeking funding can result in loss of flexibility, risk of losing personal assets, and pressure to meet expectations.

It’s worth noting that Kilo Health’s Co-found Program has a unique balance, providing the necessary funding and resources while allowing you to retain control. This model allows entrepreneurs to scale their ventures without sacrificing their vision or autonomy.

Your decision should align with your goals and risk tolerance. Thoroughly research potential funding sources, whether it’s angel investors, venture capital, Co-found Programs, or strategic partnerships. 

Regardless of the path chosen, success lies in a clear vision, strategic planning, and a keen understanding of the associated pros and cons.

Final thoughts

The choice between bootstrapping and seeking funding hinges on your personal goals, risk tolerance, and vision for your startup. 

There’s no one-size-fits-all answer, and successful companies have emerged from both paths. You need to ask yourself whether you need assistance or can do it alone. What’s your ultimate goal?

In the end, whichever route you choose, thorough research, careful consideration, and a clear understanding of your priorities will be key to navigating the journey of building and growing your startup.

Follow us on TelegramTwitter, and Facebook, or subscribe to our weekly newsletter to ensure you don’t miss out on any future updates. Send tips to info@techtrendske.co.ke 

Facebook Comments

[TechTrends Podcast] Connectivity in Africa ft Africa Data Centres MD Dan Kwach

Staff Writer

We cover Technology and Business trends in Kenya, East Africa and across the Globe. Send tips to editor@techtrendske.co.ke

Have anything to add to this article? Leave us a comment below

Back to top button