Should a business bootstrap or raise external financing?
There is a time and place for either strategy, but what we’ve noticed is that startups tend to fixate on the latter.
Some believe that once they’ve raised enough money, everything’s going to be okay. But while raising capital definitely helps, it shouldn’t be the end goal of a business.
Working with someone else’s cash gives business owners a sense of confidence and accountability. But there are many things bootstrapping can teach founders.
In fact, it’s quite common in Australia for business owners to bootstrap.
They have credit card limits of $30,000 to $50,000 – enough to run their businesses on personal credit. That’s very risky. But in the process, founders become more disciplined and thoughtful about where they spend their cash.
At the end of the day, it isn’t just about raising the funds, because a business isn’t about going from fundraising to fundraising. It’s about being able to achieve a goal, such as acquiring new markets or launching proprietary products, with that cash.
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