Does Bootstrapping Make You More Disciplined?
Whose money are you more careful with: your own or someone else's? When you're deciding whether to bootstrap or seek funding, you may want to consider which will be better for your bottom line. And not all founders agree on which option is wiser.
For Mike Wood, founder of LeapFrog Enterprises Inc. and Smarty Ants Inc., having investors means being kept in check.
In a recent interview with The Wall Street Journal, he said:
"I think it's a good idea to have independent people with money in the company. It's easy as a founder to get so emotionally involved in things. When you fund yourself, you don't have to prioritize. If it's other people's money you're spending, you tell them what you're doing, they cross examine and have ideas. The pressure is a good thing."
Jake Lodwick, co-founder of Vimeo, disagrees. Earlier this year, he told Inc. that having his firm acquired by Connected Ventures was "pretty much a nightmare."
"Whereas we once made decisions ourselves, now we were required to go to weekly meetings, then two meetings a week, then three meetings a week. Innovation slowed down on our existing products, but we also stopped launching new stuff. They fired me a week or two before I was planning to quit."
And according to Alexa von Tobel, founder and CEO of LearnVest, a bootstrapping mentality is the best way to become fiscally responsible.
"When you're spending your own money, it's really different than when you are spending someone else's money. And I, to this day, spend every single dollar like it is out last dollar or like it is my dollar. I think it helps you have such a tremendous focus and that never should go away. Even when you have almost 150 employees and you raise $25 million and you are generating tremendous revenue to when we maybe get bigger and go public. So the take away there is, think of the dollars as your own dollars, because all of a sudden it starts to change."
Do you feel it's smart for an entrepreneur to take funding, or is it wiser to bootstrap--and budget--instead? Share your take with us in the comment section below.
JANA KASPERKEVIC | Staff Writer
Jana Kasperkevic is a graduate of Baruch College, City University of New York, where she earned a bachelors degree in Journalism and Political Science. She covers start-ups, small businesses, and entrepreneurship for Inc. Her work has appeared in The Village Voice, InvestmentNews, Business Insider, and Houston Chronicle, among others. She lives in Brooklyn.