I was on the board of advisors for a friend’s company. My friend, the CEO, had built the business with a mission-driven approach.

Then they brought in a B round of investors that were quite growth-driven. They didn’t feel the CEO was aligned with them, and they pushed him out. Ultimately, his vision didn’t align with theirs, and he had given up control.

I don’t want to fear monger about taking investments. Plenty of happy and successful entrepreneurs have done so.

There are also really great reasons — like loss of control — to forgo investment and be a bootstrap startup.

What is bootstrapping?

When I talk about being a bootstrap startup, I’m referring specifically to growing your business through internal cash flow.

You probably started with some of your own savings. Aside from that, your funds are coming from your own sales. When you’re bootstrapping, you’re getting no outside investment.

Why bootstrap your startup?

1. You want to maintain control.

My friend was able to do things with his company that he wouldn’t have otherwise because he got some big investment dollars. And taking those dollars meant he gave up some control — over what the organization’s vision and mission would be, and ultimately over whether he would remain a part of it.

I’m not saying you should never take investments. At the right time and for the right business, they’re a critical part of the picture.

Seeking investment when you are more established and have a bit more leverage might help you balance dollars coming in with the amount of control you’d like to maintain.

2. Your business isn’t investable right now.

Even if you want investors, you may not be able to get them. Your business might be too new. Your product might not be attractive enough, and you may not be in the right market for outside capital.

Not appealing to investors doesn’t mean you’re out of the running for creating a successful business. Investors are taking a gamble, and they’re not always right — either about what will tank or what will soar. Even Google got rejected back in the day.

If you’re struggling to find investors, use the time as an opportunity to get more creative.

3. You have too much uncertainty.

Even if you were able to get investment, you may not be ready. Perhaps you have too many assumptions and not enough clarity. You’re not sure where you’re going next, and you want to take a more organic approach to figuring it out.

Several years ago, I met a guy at a Bootstrappers Breakfast. He’d recently left a startup that wasn’t doing well, and he wanted to start his own business. He wasn’t sure exactly what he wanted that business to be, so he was doing some consulting.

“So, you’re starting a consulting business?” I asked him. “No,” he said, “I’m building a product business. I just don’t know what the product is yet.”

His plan was to consult with folks in the industry for a couple years and figure out where the need was.

And that’s what he did. I ran into him two years later. Through the consulting, he identified some trends and designed a product that could resolve a problem in his industry. He was looking for investors and a coach. He became a client for five years.

Taking some time to better understand the market and develop organically was a better move for him than immediately seeking investors and shoehorning his own ideas into a market that might not have wanted them.

Best practices for bootstrap startups

You can only spend what you have.

The crux of bootstrap startups is this: you must prioritize your spending.

You’ll probably have to make some sacrifices. You might not be able to do everything perfectly — you’ll do it good enough (Pareto Principle). You might move forward before everything is just the way you want it. You can work out the kinks while you have revenue coming in.

And chances are, you’ll have to delay some gratification.

Bootstrapping entrepreneurs often pay themselves less than invested entrepreneurs. Investors want their entrepreneurs to be sufficiently comfortable to be able to focus their time entirely on the business. Bootstrapping entrepreneurs are a little less comfortable (and a little more in control).

You must hold yourself accountable.

When you’re spending someone else’s money, they hold you accountable. You’re focused on their getting a return on the investment. They make sure you’re being conscientious about spending. They make sure you’re meeting deadlines that will impact your revenue goals.

Without investors, you have the job of holding yourself accountable.

If you can’t hold yourself accountable, then you need to find someone who can — like a coach, a peer, or a team member that will serve that role.

You have to be creative.

With investment capital, there are plenty of formulas you can follow for how to build a successful business.

When you’re bootstrapping, there’s not always a formula or a “right way.”

There’s your way.

You may have to get creative so you can accomplish things with the resources you have or can generate. For example, say you want a professional voicemail for your business and voice talent starts at around $75 an hour. Well, you can get a pretty darn good greeting on Fiverr for $5.

One of the most successful bootstrap startups I’ve had the opportunity to work with started with three partners, each of whom put some skin in the game. One of the founders wrote code, and the other two helped connect with their industry and prospective clients.

They started with very little cash and developed a recurring revenue model. They were able to take that revenue and collect enough of it to hire another developer. They needed to hire a customer support person, but they didn’t have the money. So they waited.

They hired people when they could, and they focused on values. They couldn’t start people off at market rates, so they focused on creating a work environment that people wanted to be a part of. They recruited from tech schools and their local community.

They automated the heck out of everything. They built internal tools, customized for the exact few pieces they needed, and saved money on off-the-shelf technology products.

They stretched their resources pretty far. The more they grew, the more revenues and profits they could invest in the business.

They have about 40 employees today. It took them about eight years to get there. They still have no outside investors.

Final thoughts

The lure of investor money is strong. With those dollars, you can grow faster and bigger. You can take confidence from the fact that an investor believes in your idea enough to put their money on the line.

There are very real tradeoffs, though.

Bootstrap startups control their own destiny, and they learn how to harness their own skills and creativity. Some people say every entrepreneur should have the experience of bootstrapping their startup — that it makes them and their business better.

I don’t think there’s a one-size-fits-all approach for every startup or every entrepreneur. I do believe that too much focus on securing investment can rob startups of the benefits that come from bootstrapping.

When a bootstrap startup can lean into their own skills and creativity while maintaining control of their company, they’re in a great position for whatever comes next.

We help entrepreneurs transition from bootstrapping founders to CEOs. Contact us to learn how we can help you reach your goals.