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Among startup myths, the notion of a set path or benchmarks that have to be met is one of the most pernicious ideas to persist. There are clear objectives that any startup has to meet in order to survive and grow, but there are a number of ways in which entrepreneurs can go about hitting those marks. Traditional paths no longer hold the same resonance for today’s young entrepreneurs because the dynamics of business, and the world itself, have changed so much during this century.
The idea that a startup has to at some point seek out funding from venture capitalists (VCs) is one of the tentpoles of what could be considered the “old way” of doing things. A startup needs money to survive and eventually grow, and VCs have that money to ‘give’. And having VC funding is an imprimatur of viability and authenticity when talking with potential clients or partners, or so goes the thinking. It’s a shorthand to indicate that someone else has taken a look at your product and company and found it worthwhile enough to put a not-insignificant amount of money into the idea.
But accepting VC funding comes with its own set of challenges, compromises, and demands for entrepreneurs who might not be willing to move or change on certain points. Giving up equity in your company and essentially partnering with someone you never imagined at the outset is not the path that many entrepreneurs envisioned nor want for their company. For those founders, alternative means of growing their business are the best option of achieving their dream.
How can entrepreneurs pursue success without having to rely on venture capital? There are a couple of different ways.
Bootstrapping. Bootstrapping your business is the first method of self-financing that comes to mind, and it’s one that is certainly prevalent; I recently profiled one company that has bootstrapped their way to success. It certainly presents challenges of its own: not having a large influx of cash can force you to pare down your initial ambitions and goals to something more attainable in the short term. As a result, your growth may be slower than you’d like, particularly for founders with big ideas and strong feelings about what they want to do.
But bootstrapping can actually serve as a positive for those who refuse to see it as a limitation, or those who see the value that limitations can provide. A tighter budget can force you to prioritize and make decisions on what is essential, avoiding the profligacy that can affect those who want to take too many steps at once. And funding your own growth requires you to focus on sales and partnerships, which in turn demands all of your efforts to develop the best product you can, rather than building a company that looks good on paper to potential investors.
Alternative fundraising. The rise of the internet over the past quarter-century has democratized any number of functions that were once held in the hands of a select few, and fundraising has been so affected. Founders are now able to make their appeal for funding directly to the masses, posting projects on sites like Indiegogo and letting interested parties contribute small amounts to their goals in exchange for rewards. It’s a way to bypass the traditional gatekeepers and find an audience and customer base and hopefully engage them to not only gain the funding you need but build the fan base you want for your product and company.
Initial coin offerings (ICOs) are also a method of fundraising that has become more popular over the past year or so. It holds an obvious appeal —the combination of crowdsourced fundraising with blockchain technology and cryptocurrency tokens reads like a late-2010s entrepreneurial Mad Lib — but companies interested in pursuing that path have to be careful, as the SEC has stepped in and more heavily regulate ICOs based upon a spate of fraudulent fundraising efforts.
Every entrepreneur has to determine their own path to guide their business, whether that is an acquisition and early exit, world domination, or simply a comfortable living being their own boss. For some, that means looking for VC funding to help grow their company, and that is great; nothing about the above should be taken as an attack on venture capitalists or those who seek investment. However, those not comfortable being locked into the traditional startup roadmap shouldn’t feel obligated to seek out funding that they don’t want or feel they need; instead, they should feel free to make their own way. #onwards
April 9, 2019 at 09:00AM
Forbes – Entrepreneurs