Not too long ago, a friend told me about a young entrepreneur spending a lot of time looking for venture capital and startup money. I suggested the entrepreneur should forget the financing and use his own money or borrow from friends or family. In the businesses I’ve created, I’ve always bootstrapped it. My suggestion, if you’re an entrepreneur, is to think about doing the same thing.

Let’s start with the most obvious reason not to waste your time looking for venture capital money.

How about the reality that 99 percent of startups for VC money won’t get it? 

Some suggested I look into venture capital money when I was developing my businesses. I calculated my odds, and having a less than 1 percent chance of success was not worth it and would waste valuable time. Still, I never paid it much thought because I wasn’t willing to go through the exercise. In short, I thought it would be a waste of my time. I much preferred to bootstrap it and start making money than trying to be the 1 percent or less that gets financing.

I wasn’t willing to give away any equity stake in my businesses.

I knew that I would be successful in my companies. If you’re an entrepreneur and you doubt yourself, do yourself a favor and get a job. But, let’s assume for a moment that I had instead decided to go down the VC route. It would have required that I give up a stake, perhaps even a controlling interest, in my companies. I don’t know about you, but my ideas and solutions are mine. I don’t want to give away that decision-making ability to anyone, even if it meant an infusion of millions into my businesses.

Bootstrapping taught me to be creative and innovative. 

I’ve gone through the experience of lean days, especially as we started to take off, where I had to meet overhead costs and payroll, and there was not much margin for error on the revenue side. There were times when I went whole stretches not drawing any salary whatsoever. One of my fun moments when I get a business to a sufficient level as the CEO is to joke that the chief executive can finally get paid. One of the biggest lessons in bootstrapping is that if you’re committed to succeeding in your business at all costs. If so, the pressure to make money will push you––hard––to figure out a way to monetize your idea well. And you will have to prioritize how you use the money and resources you have.

I like developing a startup and growing to scale on my timeline.

If you get venture capital (again, not likely), it will push you to expand to scale quickly. I happen to be one of those entrepreneurs that enjoy growing and developing a business from nothing to something big. I like learning all the ins and outs of my work. More importantly, as an entrepreneur, bootstrapping allowed me to test out ideas and pilot programs to see what worked and what didn’t. When you get VC money, you get little room for experimentation because the pressure is on to get the money and profit into the investor’s pockets, which means having to scale quickly.

Venture capital firms are not all they’re cracked up to be.

Years ago, when I was thinking about investors––for about a minute––I came across an article by the Harvard Business Review. It talked about the myths of venture capital firms. A few realities were that entrepreneurs had to do their due diligence because not all VC firms were created equal. A selling point of VCs is that they can provide the mentorship, expertise, and advice they might need to take off. Not true. Another critical myth was that companies that had VC money were going to have spectacular financial returns. That was also not true, and in fact, VC companies underperformed the market.

It pains me when I hear young entrepreneurs thinking about looking for venture capital money. Please, if you’re reading this and this is you, my advice is simple. Don’t waste your time. Your time and energy are better-spent diving into your business and figuring out the path and solutions to bring what’s in your mind to the market.

 

Author of “Not Your Father’s Charity: Grip & Rip Leadership for Social Impact” (Free Digital Download)

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