Why bootstrapping your startup is better than VC

In the current fundraising environment – with background The tech market is slowing – the global investment community is looking to protect itself. Investors and founders face more pressure as investors chase deliverables fast.

But when European founders have their eye on early-stage growth, turning to VC isn’t their only option — bootstrapping your startup offers a viable option without many of the downsides of working with VCs. Bootstrapping is a process that starts only with savings (sometimes borrowed/invested from family and friends) and income you earn yourself, and can provide good support for your future growth.

Now is an especially good time to bootstrap as you are less bound by broader market trends and pressures, instead you can tap into your direct, trusted network for support and support; all of this Allows your company to move from the offset.

What do you get from bootstrapping your startup?

Bootstrapping is not an option for every startup. You must be able to get some funding, either your own or through family or friends, and have a network that is resilient enough to help you early on. At Planta, with the support of an experienced founding team, we are able to operate as a tight-knit unit and make quick decisions.

To successfully launch your startup, you must also prepare for awkward conversations, such as when first approaching outside investors.

So how do you know if bootloader is right for you? As an early-stage startup, you should focus more on where your business is going best beyond the next 12 months. You need to ask yourself:

  • How do we want to do it?
  • Which way of working is best for our business?
  • What is our revenue strategy?
  • What is the market like?

In Planta’s case, we want to build the best possible product, and in order to achieve this goal, we have allocated the maximum resources to support that goal. We believe the best way to work is to create flexibility and control. This means quick decisions and complete control over the process. It also means smaller teams, fewer projects, fewer internal meetings and no reporting, as well as eliminating all the “time thieves” that can prevent teams from focusing on building the best product for our users.

Planta launched in 2018 and funded its first year through the founder’s savings — it ended 2019 profitable. This is both a goal and a necessity for continued self-reliance, so a clear revenue strategy is critical. The first year was feasible thanks to the founders being able to create the product themselves by developing, coding and designing the startup. Only 12 months after launch, we were able to hire our first external employee, our in-house factory specialist.

👉 read: Bootstrap Beginner’s Guide

In fact, self-reliance requires patience, prioritization, and understanding that “forced situations” can often lead to creative breakthroughs— Act decisively in the face of challenges. Interestingly, we can grow with a small team and a smaller budget because it’s so much easier to manage the team and incorporate them into our mission.

Can you run more projects with more people at the same time? Yes. But it also creates more internal meetings and roadmap discussions (more “time thieves”), and when more people are involved, it’s harder to focus on the core product and real value to users.

However, even if you pursue the onboarding process, as long as you feel serious, it’s important to always listen when potential investors approach. Be careful though. We’ve met with potential investors who spontaneously say they’ve never used the product, haven’t actually downloaded the app or interacted with it at all. This is a huge red flag that clearly shows that they don’t have our users’ interests at heart.

But again, an outside party may provide high-quality advice that may lead to a breakthrough, or provide you with some groundwork as you go through your formative years. In our case, it’s not a question of always being guided, but a question of the best way forward for the company now and in the near future. This keeps all options open and investors accept that.

The Disadvantages of Venture Capital and the Advantages of Bootstrapping

Bootstrapping has always been the foundation of our growth. We became profitable two years after launch and recently expanded into Japan and South Korea in addition to North America and Europe. Bootstrapping accomplishes this in a number of ways. We have:

  • Fewer internal bureaucratic hurdles;
  • absolute accountability;
  • Optimizing decision-making policies;
  • Simplified workflow;
  • The ability to pause or accelerate projects based on strategic goals or development.

I’ve heard from the tech world that sometimes investors may insert a clause requiring their input on strategy, or certain checks and balances on board seats. Imagine the frustration of knowing the right next move, but having to wait days for the final thumbs up and possibly losing ground. Bootstrapping removes this barrier – allowing teams to execute and act quickly.

In talking to others in the ecosystem, we’ve been told time and time again that they miss the freedom of self-reliance and efficient workflow. How much time do early stage companies spend preparing for investor meetings? This can be considered a huge drain on limited resources.

in Planta, Key decisions—such as when to launch in a new market, the right time to invest in a different marketing initiative, when and where to start a new project, or simply realigning the roadmap—happened on Slack, between a few of us, Quick settlement between us.

👉 read: Bootstrapping vs VC: Choosing the Best Way to Fund Your Startup

I know of a startup that recently received their first outside investment, and the first post-investment activity was a partnership with a brand in an investor network. The founders felt it had absolutely nothing to do with their product, users or vision. It was too focused on PR, which of course was important, but it took time away from other key projects that ended up being put on hold. Crucially, this caused the first disagreement between the founders, the wider company and the new board, and it affected team morale. To me, this is a case of short-term “wins” taking precedence over the importance of core company values ​​and unity.

We recently suspended work on an income program to focus on App Performance Project. Outside investors will almost certainly tell us to go ahead with the revenue plan and make a decision and External parties will require hours of meetings, analysis and preparation.

Did we make the right decision? It’s too early to tell. But we save a lot of time, energy and resources, and we make our own decisions – we are 100% responsible for the results. All of these things give us energy, and although these values ​​and feelings are hard to quantify, they fuel us every week.

Other Alternative Financing Options

I want to stress, though, that outside capital is indeed beneficial. The European tech world would be smaller and less powerful without the investment community, and I urge startups to consider all available options when exploring accepting outside capital.

As the ecosystem continues to grow, there will be more and more accessible financing solutions – and despite the current technological slowdown, startups have options when it comes to driving growth.In the past 12 months, passive investing and Income Based Financing For example, great progress has been made.

At the end of the day, no two startups are the same, and on that basis, never limit yourself to the path your peers are taking because it might not be right for you.

For our part, we love and value flexibility How we operate, how we build our organization and decision-making process. Bootstrapping helps in all of these, and isn’t as daunting as it might seem—the responsibilities can even help you along the way.

Jesper Svensson is CEO Plantain.