Venture capital funding or bootstrap?-How this can affect your startup.

What is more celebrated than getting a job at a prestigious firm? When a company raises venture capital investment.

It is all over the media. VC funding is many times in the eye of the public viewed as business success. Nothing wrong with VC funding. Just wanted to lay that out before you conclude this is about tearing apart Venture capitalists.

Getting an introduction to VC Investors can take months, if not years. It is a very demanding process that if not managed well can take you off building the company. But bootstrapping with no steady cash flow can be a nightmare.

I wouldn’t suggest looking for VC investors in your early stages. I am not an authority in the subject, but I have seen so many businesses give out equity too early on, especially when they have no clear understanding of effective use of capital or the actual worth of the business venture.

But occasionally stepping out to speak with VCS can give you so much valuable feedback and allow you to organize your business venture to be investment-ready.

Bootstrap to get your company off the ground. When your company gains some traction or starts generating real revenues venture capitalists will start circling.

You need to focus on experimenting until you have a sound business model. Crowdfunding or Angel investment might help at this stage if you can’t cough out the initial financial investment required to get your company started. Spending a sizeable amount of time bootstrapping will allow you to focus on building a healthy business model very early on in your business.

It is really difficult creating a sound business model when you have VC money up your chest five years down the road. It is easy when your business has a way of generating revenue right from the start.

Some people argue they need VC money to scale very quickly. But why do you want to scale quickly when you haven’t figured out the nitty-gritty of the business? If you are building an app, you might need to scale quickly, but for most companies making sure you have a good product and business model should be your top priority.

Nail the business before you scale. You control the negotiation table or can at least wing some power if your business already has real financial figures, users or quantifiable traction. CNN or BBC feature if it doesn’t translate into value for the company does not qualify in this case.

Early-stage startups are better off bootstrapping until they have enough skin in the game. If your business is already raking in profits or considerable revenue figures, you have a sound business model and you are ready to scale, VC funding can do you a lot of good.

Think Interswitch, Flutterwave or Paystack. I am sure it took years to get sizeable investments, but they had real users, they had real financial figures to back their future projections.

San Francisco and Lagos-based fintech startup Flutterwave was launched in 2016 raised a $35 million Series B round in 2019. But of course, it is easy to raise money now that they have some really impressive figures. Visa bought a 20% stake in Interswitch, a company valued at over $1 billion. That did not happen overnight. Interswitch was founded in 2001.

VC to Africa totalled $1.35 billion in 2019, according to WeeTracker’s latest stats.

Bootstrapping and VC funding are equally important. Deciding what approach to take is directly influenced by your business situation and what stage you are in.

Remember, raising money is not an easy task. It will take a lot of your time. It involves endless meetings, pitching sessions, attending events and networking. You would also have to figure out what it takes to



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I write about Business, Movies (Top Writer), Fiction, Inspiration, Poetry. and anything to make you win in life.