Never Raise Money Unless You Absolutely Have To

Is it ever better to raise money than to bootstrap? Explain why and be specific.

Traditionally, there are 2 ways to build a business: slow growth (i.e. bootstrapping) and fast growth (i.e. raising venture capital). Raising venture funds allow founders to build their team faster as well as spend capital to learn faster. However, it may not be the best approach for everyone. Remember, when you have a hammer everything looks like a nail. When your company is flush with cash it’s very tempting to solve your problems by throwing more capital at them.

Before determining if you want to raise money at all, you first must decide how you would like to build your business. If building your business slowly is feasible, I always recommend entrepreneurs choose this route. While a bit riskier, I tend to see that the founders make more intelligent business decisions and are able to establish long term businesses that are more stable without diluting their ownership stake. This stems from the fact that when you bootstrap, the business is built from the ground up to prioritize cash flow and getting to the break even point so that the business can float itself and be self sustaining.