Having a great idea for a business is one thing. Getting the financial backing to grow, scale and make it a success is quite another.<\/p>\n
Most entrepreneurs approach funding in stages, starting by dipping into their own savings, going cap-in-hand to friends and family, taking advantage of government grants, crowdfunding and potentially seeking angel and venture capital.<\/p>\n
The best funding option depends on the business, its track record and growth plans. Some companies stay self-funded forever, while others need the capital injection and expertise from outsiders. Getting the right investment, in the right sums at the right time can often make the different between a startup\u2019s success or failure.<\/p>\n
Techvibes has put together a list of common investment options for startups, and pros and cons for each. It will cover the following:<\/p>\n
Bootstrapping is a term used in startup circles for companies that aim to grow the business using their own money \u2014 either from savings, getting a loan or line of credit, or using credit cards \u2014 instead of bringing in outside investors. The term stems from the old saying\u00a0\u201cpull yourself up by your bootstraps,\u201d and reflects the grit and self determination it takes to start your own company.<\/p>\n
Most entrepreneurs begin with bootstrapping to prove their business model and get it off the ground. A few examples include Toronto-based fintech Overbond<\/a>, Vancouver-based digital production firm Thinkingbox<\/a>, and Toronto-based real estate listing website BuzzBuzzHome<\/a>.<\/p>\n \u201cWe really believed that if we took funding too early we\u2019d be selling ourselves short,\u201d BuzzBuzzHome cofounder Matthew Slutsky\u00a0told the Globe and Mail<\/a>.<\/p>\n Some investors remain self-funded, while others eventually need the cash injection to fuel growth and potentially tap into expertise from entrepreneurs and investors who have been in their, um, boots before.<\/p>\n Below are the pros and cons of bootstrapping your business.<\/p>\n You call the shots:<\/strong> \u201cBy self-funding, you answer only to yourself,\u201d Chen Levanon, CEO of bootstrapped startup ClicksMob<\/a> wrote in an article<\/a> for Women 2.0.\u201cThis provides a wonderful \u2018foundation of freedom,\u2019 allowing your leadership to set your agenda autonomously, choosing everything from your direction to when to be acquired\u2026 to if you want to be acquired at all.\u201d\u00a0Bootrapping also allows you to preserve value in your business and build it in your own time.<\/p>\n Focus<\/strong>: With other peoples\u2019 money often comes a need to focus on their needs and expectations. When you self-fund the business, you can focus on which direction you want the business to go, and what your customers want \u2014\u00a0because they\u2019re usually right.<\/p>\n Frugality:<\/strong> \u201cYou can\u2019t waste what you don\u2019t have,\u201d says Karl Ulrich, vice dean of entrepreneurship and innovation at the Wharton School of the University of Pennsylvania, notes in this video<\/a>. The more focus you have on the bottom line in the beginning, the better chance you have of retaining strong margins in future.<\/p>\n Motivation: <\/strong>When your own money is on the line, chances are you\u2019ll work harder, longer and do just about anything to make your business work. The reward can be sweet, Jack Horton, founder and CEO of UK-based Whites Group<\/a>, wrote in BusinessZone<\/a>. \u201cWithout investors as partners, every ounce of blood, sweat and tears put into a business in order to make it excel, can be realized in profits once the business hits its stride,\u201d Horton says. What\u2019s more, if you sell, that means more profit in your own pocket.<\/p>\n Less money to work with:<\/strong> Assuming you business is good enough to attract investors, you may be missing out on opportunities to scale with an extra cash injection.\u00a0 That includes money to advance research and development, boost marketing efforts or hire top talent.<\/p>\n Smaller network<\/strong>: We\u2019ve all heard the saying, \u201cIt\u2019s not what you know, but who you know.\u201d This is especially important for entrepreneurs looking to build their business. By going out and raising money you\u2019re automatically broadening your network. Even if an investor says no, they may turn out to be invaluable advisor to the business, or better yet, they might know other investors willing to bet on your company.<\/p>\nPros<\/strong><\/h3>\n
Cons <\/strong><\/h3>\n