To raise funding or to not raise funding? When launching a startup, that’s often one of the top questions on a founder’s mind. But as Robbie Allen will reveal on this week’s episode of For Starters, the goal of a company isn’t to raise money—at least not as an end in itself—and all too often entrepreneurs fall into the trap of thinking they have to raise money to be successful.
The first guest on today’s episode—sponsored as always by Robinson Bradshaw—is the founder of ArchiveSocial, Anil Chawla, who gives his advice on whether founders should go the VC route or not. Next, Jes Lipson shares why he bootstrapped his first software company, ShareFile, as well as why he chose to raise funding this time around, as founder and CEO of Levitate.
Here are some of the highlights from the episode.
- One thing Chawla would tell his younger self is that it’s O.K.—and beneficial, in fact—to talk to investors and gain advice from them even if you don’t want to raise funding at that time. “Don’t get caught in the trap I was in, which felt very binary,” Chawla said. “You can take the middle ground and tell investors that even though you’re not raising funding right now, you can let them know when you do.” (15:00)
- There’s a difference between raising money to get your business off the ground and raising funding to grow your business as fast as possible. The latter can be harmful. “If you have to raise money to get off the ground,” Chawla said, “do it in a way that gives you some optionality, so that you’re not stuck in a cycle later on where you’re dependent on funding and are forced to do things that end up being detrimental to your company.” (23:30)
- If you have the ability to, Lipson recommends bootstrapping like he did with ShareFile (he went without a salary for two years). “I think [bootsrapping] is the best approach to build a company from the perspective of the entrepreneur because you have so much control, you can really make long-term decisions, and if you want to fix something you don’t have to wait to grow for a few years and then fix it,” Lipson said. “When you have external stakeholders it puts you down a certain path, and I really liked being bootstrapped with ShareFile.” (41:30)
Listen to the full episode (and subscribe!) here: