While trying to figure out what to write this blog post about, I stumbled across an article titled, 10 Reasons Why I Self-Funded My Startup and So Should You. Based on everything I’ve read thus far, and everything we’ve talked about in class – none of which involved self-funding – I thought this article would be an interesting read. Before even reading the article, I had a few questions for myself. Who could really fund an entire start-up ALONE? Are there other benefits to different kinds of funding, other than the money? Is fund raising really that bad? I decided I would go ahead and entertain myself by reading the article, thinking that maybe the author, Jon Yongfook would make some interesting and valid points.
The following are the 10 reasons why Jon self-funded his business and thinks you should too:
- You are forced to focus on revenue
- You don’t waste time raising funding
- You don’t answer to anyone
- You learn the value of money faster
- Early stage investing is rife with dubious characters
- You feel free to grow organically
- you learn what really matters
- You’re in good company (bootstrappers)
- You work on something that truly interest you
- You increase your leverage for future fundraising
Throughout the article, I though Yongfook made some good points. When you are funding your own business, you get to remain in full control and don’t have to answer to the many investors that will be helping you fund your company. Many entrepreneurs get into creating their own business so they no longer have to answer to a boss, and often time investors can seem like just that. I also agreed with Jon’s point that “you are in good company.” When funding your own business, it is almost inevitable that you will end up connecting with individuals who are also funding their own business. This small network of people can help self-funders find ways to be more successful and solve problems that are unique to their situation.
Although Yongfook made some good points in the article, I think more often than not he is simply discussing trade-offs that occur when one decides to self-fund versus fund raise. For example, he talks about not having to waste time with fund raising, and while this may be true, the times pent fund raising now has to be spent finding alternative ways (taking on extra jobs) to fund the startup. Also, even though those that self-fund don’t have anyone to answer to, they are missing out on possible mentoring and advising experience that can come from seasoned investors. a perfect example of this is ABC’s hit show Shark Tank – I know, not the most educational example. Many people participate in this show not only to get their business funded, but also to gain the expertise of a business savvy “shark”, in their respective field of business.
In my opinion, a company can be successful whether they decide to self-fund or raise funds through other means. I think it is most important for each entrepreneur to evaluate the status of their startup, and decide what is the most reasonable and beneficial way to raise money.Ultimately, each entrepreneur will need to look at the pros and cons of each and decide which route is best for their particular company and personal situation.
References:
http://yongfook.com/10-reasons-why-i-self-funded-my-startup-and-so-should-you.html
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