“Should I Bootstrap Or Raise Capital?”

A few questions to help you decide…

I get one question from the founders I coach more than any other:

“Should I optimise my business to be profitable or to become the next [insert name of $B company here]?”

It’s an important question and one where there’s no blanket answer.

But what I want to do here instead is help make the decision easier for you by providing some guard rails.

For reference, I’ve built profitable companies and growth obsessed ones.

And to clarity, they aren’t mutually exclusive outcomes in every instance.

I bootstrapped one of my companies from $0 to $7M revenue within 4 years and for another one (BigCommerce) we’ve raised $155M – so I’ve had to make this decision quite a few times.

Here are some guidelines that have helped me over the last 15 years to. Hold 7 companies to over $200M in total revenue

First is a simple question:

“Do you have a genuine shot at building a $100M revenue company that one day you could sell or take public?”

If yes AND you have a 7–10 year time horizon AND you’re OK raising money from investors, then being growth focused can be a smart move.

Ok now a few bullet points.

If you answer yes to any of these, then a profitable business could be the best decision:

  • Do you want to own 100% of your business in 5 years from now?
  • Are you OK with slower growth that’s more controlled and funded from your customers (AKA profit AKA you need a great product) instead of investors?
  • Are you optimising for lifestyle (more time with your family, etc) at this point in your life?
  • Do you dislike the 1 in 1,000 odds of building a company that can one day get acquired or go public?
  • Do you want smaller, incremental “pay days” – 6/7 figure dividends every year – instead of a tiny chance at a potential 7/8 figure pay day in 10 years?
  • Do you dislike the idea of having a board, preparing board slides and having to pitch other people to invest in your company?
  • Are you patient and can you handle “slow at first” growth for 2–3 years?
  • Do you want the option of keeping your team small and org chart relatively flat?
  • Are you great at holding yourself accountable and surrounding yourself with experienced founders to help you avoid mistakes and apply leverage to your business?

If you answered yes to any of these questions, then maybe side with building a fast growing company (which let’s be honest – means raising money, building a board, being diluted, going for a moonshot outcome, etc):

  • Do you like the idea of having investors there to hold you accountable and to whom you justify the way you want to run your business?
  • Would you prefer a 1 in 1,000 chance at a 7/8 figure exit in 10 years over a 6 figure dividend potentially forever?
  • Do you like the idea of building the next big thing and swinging for the fences to make it happen?
  • Do you want to build a larger team (potentially hundreds or thousands of employees) over time?
  • Do you believe your product can become a top 3 player in your space?
  • Are you playing in a large market where at least one competitor has shown strong signs of actual growth (revenue or customers – NOT just raising money)?
  • Are you OK owning 10–30% of your company instead of 100%, if it’s worth 10–100x what it is today?
  • Are you wired with a strong and unrelenting desire to “level up” and become the best CEO you can be?
  • Over time can you attract hundreds of thousands of SMB customers, thousands of enterprise customers or hundreds of millions of users?
  • Do you have limited financial responsibilities and commitments (mortgage, wife/husband, kids) or are you comfortable financially already (maybe from a previous exit or your investments)?

I hope these lists help you out.

And always remember – just because someone shits on raising money, for example, doesn’t mean you have to agree with them.

Similarly, if someone laughs because you want to bootstrap your company, just ignore them and if it’s right for you and your goals then do it.

As I mentioned earlier, I’ve taken both paths. And both were right for where I was in my life at the time and the outcomes I wanted to engineer at each company.

Be wary of people who write about the “perils” of raising money who have never actually done it. Be equally wary of people who preach bootstrapping as the “only way”. Do you and keep moving.

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About Mitchell Harper

Mitch is a 7x company founder, advisor and investor. He is best known as the co-founder of BigCommerce. His companies have generated over $200,000,000 in total revenue and he is currently building an online education company and a SaaS company.

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