In the process of starting multiple companies, teaching a financing new ventures class at BYU, advising entrepreneurs, and investing in startups, I have often encountered the question of whether to bootstrap or raise capital from the outset. The answer to this question is often a matter of opinion, and I am heavily biased towards bootstrapping as long as you can. The funny thing is that as much as this topic is debated, it is usually a moot point because many companies can’t raise money and have to bootstrap. The reality is that most companies will never raise a penny of venture capital or go public, not because the business is bad, but because it may not have the potential for a 10x+ return, scale fast enough, or is not in a sexy industry. I’ll admit that there are times when raising money is essential to get to market quickly, grab market share, expand globally, or build/upgrade the management team, but even in these scenarios, the bootstrapping mindset can still exist.
I like the bootstrapping mentality because it helps the company develop discipline, create culture, and value every dollar, and keeps ownership and control with the founders. Even if you ultimately raise outside capital, bootstrapping as long as you can is crucial to maximizing your valuation. I have fond memories of the early days of Zylun—sharing a basement office with another company, with 3 employees working out of the storage closet. That experience and those stories have molded our company’s culture to focus on ROI of everything we do, question every dollar spent, and focus on profit not just revenue. Because we worked so hard in the early days of our business to instill the bootstrapping mentality, our US team and Philippines team are constantly focused on increasing the bottom line and allocating company resources to their best use. When in doubt, Bootstrap.