Best approach for a Startup. Raise Capital or Bootstrapping?

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Best approach for a Startup. Raise Capital or
Bootstrapping?
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• Introduction
• Starting a business in the contemporary economic
  environment is not for the fainthearted.

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• In fact, there has never been any ideal time for
  starting a new venture.  However, there are many
  new challenges that startups today face.

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• Unique challenges today include high cost of
  operations, geopolitical shifts such as Brexit, a
  globalized marketplace, increased regulations,
  and shrinking markets among many others.

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• Among the main causes of such failure is poor
  cash flow.

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Startup Financing Options
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For a startup to survive these formative years,
it is crucial to have a financing strategy in
place.
For a startup to survive these formative years,
it is crucial to have a financing strategy in
place.
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The two main options for startups are raising
capital by floating equity shares or
bootstrapping.
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It is important to get more insight on these two
approaches in order to make the right decision.
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1) Bootstrapping in Brief
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Like the term implies, you are able to pull
yourself up using resources within the startup
and without external help.
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To become successful, you have to embrace a
multi-pronged approach in finances and it
involves owner financing, personal debt, sweat
equity (effort), fast turnaround, subsidy
finance, cash-only approach and low operational
costs.
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Some of the major companies that started out by
bootstrapping include Facebook, IBM, Oracle Corp,
eBay, Coca Cola, Cisco Systems among others.
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A) Pros of Bootstrapping 

• It is Affordable You will be forced to focus on
  efficiency and this means adopting a lean
  business principle.

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• Baptism by Fire The fact that you dont bring
  in investors with knowledge also means you have
  to adapt fast to decision making which helps you
  learn how to run the business fast.

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• Your Own Boss You will remain your own boss
  because you dont dilute your equity by welcoming
  wealthy investors.

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• Faster Progress You will have more motivation
  to build a brand that lasts long and this is one
  reason bootstrap startups are more likely to
  become household names such as Facebook.

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• Full Focus Your attention is on your core
  business and not on crowd funding and other
  funding efforts. You are able to concentrate on
  your books and strategies that will make your
  business grow.

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B) Bootstrapping Drawbacks
Some of the cons of bootstrapping as a startup
include poor cash flow which can hinder growth,
lack of experience, higher risks of losses, and
more responsibilities, among others.
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2) External Financing for Startups 
For most startups, there is an urgency to grow
the business. In most cases, entrepreneurs will
have harbored such ideas for years and when they
finally come around to building the business, it
is all systems go.
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There are many reasons why you should think for
external funding as opposed to bootstrapping.
Take a look at some of these benefits
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• Faster Growth One reason why most new ventures
  struggle in the initial stages is of course lack
  of enough capital. However, if you seek financial
  help from an external investor, you will have the
  funds required to spur faster growth.

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B) Wealth of knowledge Many investors bring in
knowledge and experience to your business venture
which is something a startup badly needs.
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C) Lower risk By sharing investment risks with
an external source, you will not be overly
exposed to business risks.
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Final Thoughts
Which is better? Bootstrapping or raising
capital? It is advisable to bootstrap until you
finally have a business profile or a proof of
concept. In such a case, you will be in a
better negotiating position.  If you are still
thinking a better approach for your Startup,
dont hesitate to reach us.
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