Balancing Investment and Bootstrapping: Strategies for Entrepreneurs

Navigating the financial waters of external investment versus bootstrapping is crucial for any entrepreneur. We’ve gathered insights from CEOs and founders, who have firsthand experience in this delicate balance. From understanding the necessity of balance with conservative forecasts to choosing bootstrapping for resilience, discover the diverse strategies in our compilation of nine expert perspectives.

• Balance Necessity with Conservative Forecasts
• Explore Non-Dilutive Capital for Growth
• Scale with Timely External Investment
• Leverage Investors for Resources and Credibility
• Bootstrap for Control and Ownership
• Source Strategic Alliances for Non-Monetary Growth
• Raise Funds for Low-Cost Channel Development
• Secure Favorable Terms for Financial Safety
• Choose Bootstrapping for Resilience

Balance Necessity with Conservative Forecasts

One of the biggest challenges when starting a new company is funding. From unsubstantiated values to aggressive sales projections, owners must balance necessity and convenience. For some, the option to accept outside funding doesn’t exist.

Whether it’s a matter of concept validation or performance track record, separating investors from their money is extremely challenging and must be approached diligently. A thorough and conservative review of market opportunity, compared with OPEX and planned spend, is the first step when seeking outside funding.

I suggest at least six months as a baseline, but it can’t hurt if a longer financial forecast is possible. However, when the only option is to bootstrap a new venture, every cost matters, and if the owner(s) need to supplement their income, what’s the cost impact in terms of time and brand contribution?

When available, external investments can make the difference between accelerated growth or delayed market entry. There are many unique options for accepting outside investment, and I always recommend consulting legal counsel and finance experts. Each has advantages and disadvantages, from simple equity/subscription deals to conversion finance or even hard money loans.

In the case of Hi Seltzer, we applied personal funds to incubate the products. Still, once we understood the real market opportunity, it became clear we would need to raise significant funds to meet production requirements and satisfy consumer demand. At that point, a comprehensive business plan was created, and our funding initiative began with friends and family.

Our initial sales data indicated significant velocity and market demand, which provided an aggressive valuation and subsequent $2M funding round. To that end, most UoF was earmarked for production, marketing, and strategic partnerships. This strategy yielded significant market penetration in over 3,000 retail locations, distribution in 23+ states, partnerships with established retail brands, and numerous awards for quality, ingenuity, and branding.

Hi Seltzer is now among the fastest-growing THC-infused brands in the country, but we remain hyper-focused on cash flow, burn, and forecast opportunity. The messaging at Hi Seltzer has stayed the same, and when asked about product evolution, we always reflect on simple solutions with predictable results. Spend when necessary, save when possible, and never compromise the brand’s integrity for anyone or any amount of money.

Louis Police
Cofounder and CEO, The Hi Collection

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Explore Non-Dilutive Capital for Growth

In the dynamic post-2021 market, securing VC funding has become more challenging. VC expectations demand substantial YoY growth, robust revenue, and a path to profitability. Many founders, not meeting these criteria, face the dilemma of either bootstrapping or accepting a valuation that sacrifices significant equity. Bootstrapping works for short-term needs, if cash flow permits.

Another founder-friendly route is exploring non-dilutive capital, which works for short- and long-term growth projects without negatively impacting your cash flow or requiring equity. Specialized revenue-based funding providers cater to SaaS and tech startups. They streamline the process digitally and provide an alternative to traditional banking hurdles.

In today’s funding landscape, you can’t just rely on the legacy means of growing your startup; you have to strategically think outside the VC/bootstrap box.

Carlos Antequera
CEO and Co-Founder, Novel Capital

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Scale with Timely External Investment

I own a real estate investing business, and I started by buying my first property with money I made from my day job. I then reinvested my positive cash flow into more properties and reinvested that cash flow into new properties. That’s why I continued working at a day job for several years into my business—even as I had several properties to manage.

Earlier this year, I quit my day job, and I started a joint venture with a partner, which meant that I took in external money. The timing was right; I wanted to scale and had a solid business to build on. That’s why I decided to go for external funding—because of the possibilities it offers me to scale my business.

Ryan Chaw
Founder and Real Estate Investor, Newbie Real Estate Investing

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Leverage Investors for Resources and Credibility

I started my content writing company, Write Right, by bootstrapping it. For the first few years, I was able to grow it organically and sustainably. I enjoyed the independence and flexibility that bootstrapping gave me. Being the sole decision-maker, I could experiment with different ideas and strategies.

However, I also realized that bootstrapping had limitations and that I needed substantially more capital to gain resources and scale up my business.

Therefore, I pitched my business idea and vision to various investors and secured funding from some of them. Here’s what I gained: expansion of my team, improvement in my services, and high-budget marketing of my brand. A bonus perk was to leverage the network and expertise of my investors to grow my business and gain more credibility.

However, there were some trade-offs, such as not being my own boss, reporting to my investors, and aligning my goals with theirs. But it all worked out in the end.

I believe as a coming-of-age entrepreneur, you should always first try to make it on your own, learning from your mistakes, and when you are confident enough, then maybe, burn your investors’ money.

Bhavik Sarkhedi
Growth Head and CMO, Content Whale

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Bootstrap for Control and Ownership

There are a series of questions that will help determine the best outcome for an individual. You’ll want to look at the goals for your business and know what your best-case outcome looks like.

Ask whether you have the money to bootstrap. If no, you’ll need external investment. If yes, then ask whether you want to bootstrap. Would the money you have on hand be more useful elsewhere? It may provide personal financial security, allow for additional investments, or be used as a rainy-day fund if future rounds of financing fall through.

Then, look at the cost of money. Currently, the cost of money is high, with high interest rates. In the past, external financing was accessible with low interest rates. Finally, determine the pros and cons of seeking external investment. If you want 100% ownership, some types of external investment may not be right for you.

I bootstrapped Brill Media because I had the money in-house, and I wanted 100% ownership of the company.

Robert Brill
CEO, Brill Media

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Source Strategic Alliances for Non-Monetary Growth

I realize how difficult it is to decide whether to seek outside money or employ “bootstrap” tactics when I think about our journey. My strategic vision, business knowledge, and our company’s unique path influenced my choice.

Strategic alliances were one option I considered. Subsidence Ltd. actively sought partnerships with well-known companies since they felt these would benefit the business. These partnerships revived our business. They also showed us new ways to harness our partners’ considerable resources and expertise. We immediately gained access to cutting-edge technologies, massive distribution networks, and established client bases when we partnered with industry leaders. These relationships benefited both sides and allowed Subsidence Ltd. to grow swiftly without borrowing. I now realize how crucial strategic connections are for me as a business owner.

My multi-part strategy shows I can set high growth targets while being frugal. Subsidence Ltd. was effective at balancing outside finance with ‘bootstrap’ tactics based on our aims, industry, and resources. This complex approach to decision-making highlights how crucial it is to personalize each phase to meet our environment.

As CEO of Subsidence Ltd., I learned how crucial transparency is for long-term corporate growth. Strategic alliances make sense for outside investment or self-funding. This illustrates my delicate tango when putting together business-friendly options. Subsidence Ltd. shows that finding the correct blend of methods for long-term success is difficult. We must remember this to grasp the complexity of growth.

Matthew O’Sullivan
CEO, Subsidence LTD

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Raise Funds for Low-Cost Channel Development

The best way to balance external investment and bootstrapping is to have a strong understanding of low-cost customer acquisition channels and to raise double the operating costs necessary to get the low-cost channels up and running.

If you don’t have the capital to support yourself to a point where the low-cost channels (SEO, short-form mobile video) are generating enough sales to support the business, then raise double the amount necessary to get there.

Double because it always takes longer than you think—usually twice as long.

Through bottom-of-funnel search engine optimization and channels like TikTok and Instagram Reels, strong inbound channels can be set up in a few months or less.

With SEO, simply target only keywords related to use cases around your niche. The more long-tail, the better. This means there’s less competition because the search volume is low, despite the purchase intent being high.

Use low-cost platforms like Featured.com or Product Hunt to build links and increase domain authority so your website can rank for your bottom-of-funnel keywords.

With TikTok and Instagram Reels, shoot and edit everything in the TikTok app. It should take 15 minutes per video. Video production is free. Video promotion is done automatically by the TikTok algorithm (also for free). Only make videos about your business.

Eventually, you’ll make one that goes viral, and this one video can literally generate hundreds of thousands of dollars in MRR. Focus on this channel, especially if you believe you have product-market fit.

One viral video is evergreen.

We can repost it to Instagram Reels every few months and go viral again and again (this is something I’ve done repeatedly myself).

The MRR compounds, and as this happens, you improve the product or service.

In a couple of months, these low-cost channels should be bringing in enough customers for the business to be self-sustained. At this point, you don’t need outside capital, and you can keep reinvesting into the low-cost channels to grow dramatically.

You can even take excess capital and try to find positive unit economics with paid media. This requires more risk, so I would only try this if you already have a proven paid media strategy or after the low-cost channels have been successfully set up.

Edward Sturm
Fractional CMO, Edwardsturm.com

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Secure Favorable Terms for Financial Safety

As a general rule, you want to raise money on terms that are very favorable to your standing in the business. You’ll want favorable terms on the way up, but you’ll definitely want them on the way down. I know venture-backed companies that wound down, and the founders left empty-handed because of the prioritization the investors received. This inevitably means raising money when you are on the way up and are presently operating as a very desirable investment.

Trevor Ewen
COO, QBench

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Choose Bootstrapping for Resilience

One of the toughest decisions I faced as a leader centered around the choice between raising funds or relying on bootstrapping for our company’s growth. This critical juncture demanded a thorough examination of the potential pros and cons each avenue held.

On one side, securing funds from external investors promised a substantial injection of capital, propelling swift expansion and potential market dominance. Yet, this route came with the trade-off of surrendering part of our ownership and navigating investor complexities.

Conversely, bootstrapping meant relying on internal resources and revenue, maintaining full control but possibly slowing down our scaling process and limiting market opportunities.

This decision weighed heavily on me, as entrepreneurs are generally just one bad decision away from seeing their doom.

After thorough brainstorming and consulting stakeholders and experts, I chose bootstrapping. Despite initial challenges, it instilled resilience, innovation, and financial discipline. Opting for sustainability over rapid growth built a foundation enabling us to weather market fluctuations, stay true to our vision, and value the journey over shortcuts.

Sonu Bubna
Founder, Shopper.com

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