Wednesday, 10 September 2008

Plan B for Fundraising

Guy Kawasaki has an interesting post comparing the merits of bootstrapping vs. early VC backing which is well worth reading. He nicely positions bootstrapping as a Plan B, and certainly makes it appear quite an attractive option. My own take would be:

Product Sells Product Doesn't Sell
Venture Backed You exit and have to share some of the rewards* with the VCs The company fails and everyone is unhappy.
Bootstrapped You exit, but probably only after raising some money to give yourself strategic options and thereby boost the price. The company fails and everyone is unhappy.
(* in our experience ventures that have insufficient capital to have other strategic options get sold for a lower price, so maybe the rewards would not be so different too.) So my advice would be to understand the future for your business and really decide if VC money changes the potential outcome in a good way. If it doesn't then don't take the money just to give yourself a salary along the way!