Bootstrapping vs Fundraising: Which is better for your SaaS Startup?
Every early-stage SaaS founder has to answer that question. It's easy to assume that fundraising is the only way to get things off the ground, but that isn't always the case. There's no right or wrong answer. Neither option is good or bad.
But one of them is more likely right for you.
That's why I've put together 5 questions to help you decide.
Bootstrapping vs Fundraising: 5 Questions to Help You Decide
1. How much do you need to get up and running?
You need money to get your startup off the ground and keep it going.
So you need to estimate your expenses, revenue projections, and how long it’s likely to take for your startup to make a profit (or at least cover its costs). And then you should ask yourself if your savings will give you enough runway.
Bootstrapping could be an excellent way to start if the runway is there.
2. What is the competitive landscape?
You must understand your startup’s competitive landscape.
Pinpoint your competitors, determine your unique value prop, and assess how you will acquire customers. By doing this, you’ll be able to understand if bootstrapping is a viable option. On the other hand, it may make you realize that you won’t stand a chance of being noticed without fundraising.
Your competitive landscape may force your funding decision.
3. What's your growth plan?
A growth plan will help you decide whether to bootstrap or fundraise.
You should set a specific revenue goal and determine what resources you'll need to get there (and how fast). Fundraising could be a good option if you're confident that your business can scale quickly. Alternatively, if you can grow a sustainable business over time with less money, bootstrapping may be the better option.
A realistic growth plan will help you make an informed decision.
4. What are your personal goals?
You should consider your personal goals when making a funding decision.
Take the time to clarify what's important to you. What's your desired level of control, aspiration, and preferred work-life balance? For example, if keeping control of your company is a top priority, bootstrapping may be the better option. On the other hand, fundraising is necessary if you want to achieve significant growth quickly.
You'll make a better funding decision by keeping your personal goals in mind.
5. What's your risk tolerance?
Your funding decision should align with your level of risk tolerance.
This is important when deciding between bootstrapping and fundraising because the two options have different levels of risk. For example, bootstrapping may be the better choice if you have a lower risk tolerance, as it can help you avoid taking on significant financial risk. On the other hand, fundraising may be necessary to achieve the desired returns if you have a higher risk tolerance and want to pursue significant growth.
Understand your risk tolerance to make the right decision for your business.
I hope these 5 questions help you get clarity on the right path.