Funding from an angel investor or venture capital firm has its lures. In addition to having money to quickly scale your idea, seasoned investors can lend advice and help steer your company to profitability. Yet plenty of entrepreneurs intentionally do everything they can to forgo funding. Marty Puranik, president and CEO of cloud hosting solutions provider Atlantic.Net, says he's reaped a handful of rewards from never taking an outside dime in his company's 21 years of doing business.
1. You're the boss.
How would it feel to have an investor meddling with your strategy? "If you ask most entrepreneurs why they start their companies, they'll probably say freedom is their primary reason," he says. "They're free to make their own decisions, free to call the shots, free to make the product they want."
2. You have time to make mistakes.
Accumulating entrepreneurial wisdom involves learning from mistakes. But when you're on a fast track with an infusion of cash you might hire people with skills you lack and never get exposure to all aspects of your business, which could be costly once your company has scaled and those people are no longer around. "Let's say you hire a COO, and that person is really good at negotiating from a vendor. You're never going to learn to do that yourself," he says. "You can become a better, well-rounded business person by doing it yourself."
3. You can focus on your business.
Taking money means chasing whatever metrics your advisors are after. "This is important because those metrics can change," he says. "At one point it might be total subscribers, then it may change to paying subscribers. Later it might be profitable subscribers. It's very difficult to keep changing to fit whatever investment thesis is hot."
4. Regardless of what they say, investors want an exit.
Even if your funding sources profess to being in it for the long haul, the reality is they're investing with you versus somewhere else. "They are looking for a return, and generally want an exit within five to eight years," he says.
5. Funding leads to more funding.
Ever-increasing rounds leading to a liquidity event can be a treadmill that's difficult to get off. "None of this is really important if you are passionate about what you are doing," he says.
6. Pivoting is easier.
Changing your direction is difficult to do when your investors put in money based on the original business plan.
7. You're not subject to market timing.
In other words, you are free to pursue what makes sense until the market comes around to seeing things your way. "In new markets, the vanity metrics might be subscriber growth, number of employees, or any other metrics that in the long term may not really matter," he says. "You can focus on actually building a business and making sure your customer acquisition strategies make sense versus experimenting with big dollars."
8. You'll save money and have less stress.
Playing with someone else's money is stressful. Plus, with fewer contracts and agreements you'll spend less on legal fees and accounting. "Running a business without funding is a simpler and more fun way to enjoy operating one," he says.