In the age of Kickstarter, some companies are raising huge amounts of money to start up. However many of these companies don’t reach where they intend to. Should start up companies be focusing more on how to market and making money rather than raising the investment they need?
Recently Justin Thouin of LowestRates.ca wrote an article for a major news organization where he said companies should start with relatively lesser seed money and focus more on becoming profitable instead.
He feels that while it is not feasible for all companies to start with relatively little seed money and become profitable it was possible for his company. Many ventures require costly infrastructure or technology to get the ball rolling and that there is no one-size-fits-all solution in business, he adds. “When I started my rate comparison site, LowestRates.ca, we chose to not raise huge sums of money. Instead, we launched the platform with $150,000 and told ourselves if we run out, we’re done. We bootstrapped and focused on selling our vision to customers, not investors. Here’s why it worked for us, and why it might work for you too,” Thouin said in the article.
Starting with a set amount can be the best way; it will not only drive you to be more creative and resourceful but also find ways to acquire customers. You would be forced to prove your business since you don’t have a safety net and that can be great for a business.
[pullquote align=”normal” cite=”Justin Thouin of LowestRates.ca”]When I started my rate comparison site, LowestRates.ca, we chose to not raise huge sums of money. Instead, we launched the platform with $150,000 and told ourselves if we run out, we’re done.[/pullquote]
For example Thouin says he acquired customer through search engine optimization which is not as expensive as other traditional marketing methods. However it does require expertise and patience but can bring in good results. The result of the SEO was a profitable customer base and that is something no amount of seed funding can buy.
In the startup world bootstrapping means starting a business without external help or capital and is a great way for companies to come into their own. However bootstrapping is not easy, there are many hurdles that will have to be crossed and it is not the glamorous world of startups like most people imagine.
It can be difficult no one knows about your company and you don’t have substantial marketing funds to get the word around. You can often find yourself working for numerous hours without any substantial results. The most important thing is do believe in yourself and do what you believe will help you in the long run. If your business model is successful you will find yourself being thankful for not going overboard with the funding in the early daysRaising funds can be helpful in many ways, not only can it get things moving faster it can also generate media attention, motivate staff and bring in new partnerships but not all companies require huge investments right at the beginning. So it is very important for the entrepreneur to make sure they are taking the right decisions regarding funding and not getting drawn into just generating funds and neglecting the main purpose of the business.
The best way to do this is to remember that when you are getting funded, they expect something in return, and most often it is stock. This means that you are giving up a part of the company that could have been yours when the business is doing well. Ask yourself if using the funding now is worth losing a piece of the company in the long run.
When some companies are more focused on raising the money and keeping their investors satisfied they are not as focused on making money and satisfying customers which is very important for the business and the reputation of the company.
While bootstrapping may seem really difficult at first it will help your control your own future. You do have to deal with more risk but remember that you also get to make the decisions. Sure, you may have less money right away but that means there will be pressure for your business model to get better and you will be able to retain bigger parts of your company.
While bootstrapping is the best choice for some it may not be for all, the decision is yours to take but remember that patience, confidence and dedication will go a long way no matter which route you choose.