Founder's Journal
Bootstrapping vs. Venture Capital
Dec 20, 2023
Jason Fried, co-founder and CEO of 37signals, discusses the tradeoffs of bootstrapping vs. venture capital. They examine the unconventional approach of their bootstrapped company, the value of focusing on costs and product in a hyper-competitive space, starting as an agency to fund a software-based business, and the concept of optionality in shaping a business.
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Quick takeaways
- Bootstrapping allows businesses to maintain control, flexibility, and focus on sustainability and building a great product.
- Bootstrapped businesses prioritize creating a superior product, unique perspectives, and keeping costs in check for long-term success.
Deep dives
Bootstrap vs. VC: Understanding Trade-Offs
Bootstrapping is a viable route for software and tech businesses that have minimal expenses and can get started with limited funding. Raising venture capital may be more suitable for ventures with significant upfront costs, such as manufacturing or biotech. By bootstrapping, businesses have the advantage of maintaining control, flexibility, and optionality in their growth trajectory. They can focus on sustainability, building a great product, and keeping costs low. In contrast, raising venture capital often means becoming beholden to investors and having to follow a predefined growth path. It can create a false sense of separate competition and rely on significant marketing spending that may not translate into long-term success.
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