You’ve launched your startup ideas and are ready to bring this vision into long-term success.
But your startup requires funding, especially as you are looking to grow it in its early development stages.
In this scenario, we will look at funding your startup with personal finances, otherwise known as bootstrapping. Bootstrapping refers to creating a new business without the use of external funds, one of the great advantages being that it allows for greater flexibility.
Revenue can be taken from personal savings, low or no interest credit cards, mortgages or lines of credit on your home.
This article is the first in the startup funding series, providing you with the guidelines and resources to help you expand your startup.
Starting with Bootstrapping
Bootstrapping is often one of the first funding methods used by entrepreneurs.
After all, the first investor in your startup is yourself, showing to the world that you have a long-term commitment to your projects and are willing to take risks.
When you believe in the vision of your startup, other investors will be far more likely to trust and invest in your ideas.
The preliminary task is to maintain a strict discipline related to the cash flow.
Advantages of Bootstrapping
Bootstrapping has a number of advantages, including:
- Maintains equity and ownership of your startup at its early stages.
- You do not have the added pressure of an investor that is second guessing your strategies and moves.
- Flexibility with business ideas because there are no external obligations.
Disadvantages of Bootstrapping
It’s important to understand all aspects of bootstrapping when making a decision for self-funding your business.
Disadvantages to bootstrapping can include:
- While bootstrapping allows for flexibility, you also hold greater risk and responsibility for all the debt incurred, should your startup fail.
- You may not have enough money to scale the business at a faster rate.
- Once your funds run out you will need to find external investors.
Putting bootstrapping into practice
There are a few ways that you can begin putting bootstrapping into action.
- 1. Find your industry and niche.
- Focus on a market and industry that you know and love, and market well in that one area.
- 2. Working on the startup as a side business.
- This means that you are using your free time to work on this project, whether it’s after-work hours or over the weekends.
- 3. Keeping things in-house.
- When you are just starting out, keep things in-house for as long as you deem necessary.
- 4. Saving up.
- Setting aside a large chunk of money for your business venture will ensure that you have at least a few months of revenue where you don’t need to worry about the finances.
- 5. Build around your budget
- Build a plan around your budget to ensure that you are not overspending.
Setting yourself up for success
Bootstrapping allows you to be fully in charge of your startup.
Your commitment and responsibility to it will shine through during these early stages, as you build it up towards long-term success.
Here at Altitude Accelerator, we know that building a startup can be difficult. That’s why we created a blog series called #HelpMeStartup designed to clear up some common confusions among first-time startup entrepreneurs.
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