# Bootstrapping vs investor money
- URL: https://www.petrikajander.com/bootstrapping-vs-investor-money/
- Author: Petri Kajander
- Date: 2020-06-05
- Language: en
- Audio: https://anchor.fm/s/1018a6478/podcast/play/98857246/https%3A%2F%2Fd3ctxlq1ktw2nl.cloudfront.net%2Fstaging%2F2025-1-22%2F395326671-22050-1-99a85b5043aa42f1.mp3
- Video: https://www.youtube.com/watch?v=H5461Tw9gW8

Investor money is a big temptation. Bootstrapping is hard. It has its advantages but you may appreciate them only later.

One of the perks is that you need to focus on paying customers. This is a very good driver for finding the real pain points and tuning in to the actual customer needs.

Hard pressure makes diamonds and these gems might be the insights and product decisions that are the foundation of your company later on.

The struggle is real. Having a bit more money makes life easier. A bit more team members, a bit more time to focus on other things than doing your admin at night.

The stress shifts from immediate survival to performance pressure when you take some investor money. Now, you’re not just with your founders in the company anymore. It’s a joint venture with other people who have invested in you and they have a say on your future decisions.

External funding is a category type of issue. It’s just a matter of degree when you have external investors on board but when you don’t you have still more opportunity liquidity in the direction you’re going with your company.

Some decisions have very long-term consequences and therefore they should be considered carefully. Buying out investors is hard or at least costly if you change our mind later. Divorces are seldom pretty even in the business setting.

There are no right or wrong answers but experience tend to make some entrepreneurs shying away from institutional funding if they can. They know there are no free lunches and sometimes compromises may break your spirit and motivation.

VCs and entrepreneurs seldom have perfect alignment in their objectives. This is just the nature of the beast and comes from the different business models and their stipulations.

Make sure you genuinely understand what you’re getting yourself involved with. We tend to appreciate something only when we don’t have it anymore (e.g. think freedom in terms of decision-making).

Maybe selling to customers is not such a bad thing after all? Revenues are a pretty sweet deal in many ways. Long live bootstrapping.

[Video](https://www.youtube.com/watch?v=jkITlXhz2zA)

## Transcript (https://www.youtube.com/watch?v=H5461Tw9gW8, YouTube's automatic captions)

[0:03] Money investor money is a big temptation bootstrapping is hard it has its advantages but you may appreciate them only later one of the perks is that you need to focus on paying customers this is a very good driver for finding the Real Pain points and tuning into the actual customer needs heart pressure makes diamonds and these gems might be the insights and product decisions that are the foundation of your company later on the struggle is real having a bit more money makes life easier a bit more team members a bit more time to focus on other things than doing your admin at night the stress shifts from immediate survival to Performance pressure when you take some investor money now you're not just with your Founders in the company anymore it's a joint venture with other people who have invested in you and they have a say on your future decisions external funding is a category type of issue it's just a matter of.

[1:08] Degree when you have external investors on board but when you don't you have still more opportunity liquidity in the direction you're going with your company some decisions have very long-term consequences and therefore they should be considered carefully buying out investors is hard or at least costly if you change our mind later divorces are seldom them pretty even in the business setting there are no right or wrong answers but experience tend to make some entrepreneurs shying away from institutional funding if they can they know there are no free lunches and sometimes compromises may break your spirit and motivation VCS and entrepreneurs seldom have perfect alignment in their objectives this is just the nature of the Beast and comes from the different business models and their stipulation make sure you genuinely understand what you're getting yourself involved with we tend to appreciate something only when we don't have it anymore for example.

[2:11] Think freedom in terms of decision making maybe selling to customers is not such a bad thing after all revenues are a pretty sweet deal in many ways long live bootstrapping.

## Transcript (https://www.youtube.com/watch?v=jkITlXhz2zA)

[0:00] Should you get some external money? Meaning investor money or should you just bootstrap, grow with revenues? This is what we're going to talk about today. And this is a pretty important topic. And it's up to you to make the decision. Obviously, it's your company, but I can give you some ideas about what I've found along the way. There's a tendency that if you've been founding and building companies, you may not actually want to take investors in the first place. You wanna bootstrap your way up and there are a few reasons to do that. One of them is, and this is actually in another video where I'm talking about 'making money now and money in the future'.

[0:58] So go and check it out. There I'm going more in details what are the good parts of making money now in the short-term. Just briefly, there's traction, good indicators that you're doing the right things, but we are getting distracted here. The point is that if you are bootstrapping, it really puts you to focus on the moment now. It really puts you where your mouth is. You really have to focus on providing value quickly to the customers, building a product they are willing to purchase and use. And it's really a valuable product for the customers you want to serve. And this is something which is a bit easier to overlook when you are flushed with cash for a while.

[1:59] If you're taking investor money, it's not real revenues, it's not real money in the sense that you have not earned it. You have sold part of your company. And it doesn't mean that you actually are doing the right things for the customers. So you are actually buying a bit of time to figure things out. Or maybe if you're in later stages, obviously, they are different reasons to take money. One of them is to scale if you already have a product-market fit. But let's go into the topic bootstrapping. Why it is something to think about before you'll take a little bit of money? Well, we already talked about the focus. That's important. It focuses you on the revenues. It focuses you on delivering the right things. But the other thing is that when you don't have anyone external, you only have the people who are working with the product and your founders.

[2:57] The owners are maybe the team, the people you trust, and you don't have anyone external. It's a huge thing. And this is something you may appreciate only later on when you have lost that thing. It's the freedom to decide. It's the freedom to do those decisions, which you think are the right ones, which you as a founder, you, as the CEO, you as the one who started the whole thing and have a mission, you have a purpose why you doing all these things. It may not be popular. It may not be easy. It may take some hard decisions, but because you are in control. You can make those decisions.

[3:47] And when you take someone external, who is giving their money to you, who is trusting you, it's not your company anymore. It's a joint venture with all the other people involved, the investors and you. And you have to take into account what they have to say, what they think about what is good. And obviously, they are looking for the return on the investment, they want to get their money back. And in some cases it may be that you are not aligned with the investors with your purpose and your way of thinking where we should go, how should we do things. Investors may have some objectives as well. If they are venture capitalists, they have a limited fund time.

[4:36] The fund needs to exit. It needs to return the money to the investors, but the market and timing and other things may not be exactly aligned with their objective. And they have other companies in their portfolio as well. So this means that they may sacrifice you for the sake of the portfolio or other reasons like focusing on the real winners or something else. Nevertheless, it's your company. You decide what you want to do, but are you in control? And that's one of the very important points in bootstrapping. It's a category thing.

[5:26] Another thing in bootstrapping is that often it takes hard pressure to make diamonds. If you're forced to do hard decisions, if you're forced to find the right match, if you're forced with the limited resources to make something work, it might be that you actually hitting the gold, really making something work, which you may have overlooked if you have more money, if you have more resources. Because money doesn't, and I'm talking about the investor money, really actually help you to solve things if the product is not working. It doesn't help you with the product-market fit in the sense that you really need to work on your value proposition, finding the user experience, finding that pain point, finding all those things in the puzzle that it will click.

[6:32] Then when that works then you can take money and scale it, but then you already know that it works. It's like a train on a track already. And what do you do? You just push the pedal and make it go fast. But you need to find the right track first. And that's the thing where bootstrapping can help you as well. It sounds like a blessing in disguise. It doesn't sound like fun. It is not a fun message. But still, I warmly recommend thinking about it, at least. There are no right or wrong ways to build companies and they are different situations, but bootstrapping is something to consider. You can only do it once when you take the investor money.

[7:26] Then it's not pure bootstrapping anymore. Good luck with your company and see you in the next video!