Digital Ventures

When bootstrapping should come to an end?

Some would say you should always be ‘bootstrapping’…and in a way I agree.

If you have started with financial diligence and you hit hard times you can go back – also you can keep the same mentality but raise more funds at the right stage.

There will come a point when keeping the costs down and taking time bartering for everything become counter productive – this is the time to raise more money, it could be angel funding or VC/VCT funds – my other articles can shed some light on where to get the money and how.

In these cases it is just a question of timing and raising the finance for the right reasons.

In my case I try and bootstrap all the way up to the need for more resources on rolling out products using a larger sales force or marketing resources, often beyond the seed capital stage.

For you it could be that you are selling via third parties because you saved costs at the beginning by going down this route. Now you might have reached the point at which you are just giving away margin, now your products are proven, or that by selling direct you can give a much better service to your customers.

You may be capacity constrained by lack of equipment, warehousing space, telephone systems and the like – all good things to raise money for, but requiring different types of finance such as bank loans and leasing finance.

You will usually know when you need more money because you will need to get to the next step such as selling to a big account but that requires more resources, or you need some special equipment or more R&D now that you have proven a concept.

These are positive reasons to move on to the next step – just try and ensure that you are raising and using the new money as wisely as you did the initial funds.

There is no black and white answer to when bootstrapping should end – I keep on doing it for as long as I can…