Feeding Growth: When to bootstrap versus when to raise capital.

Author:Goodsell, Brittny
Position:Entrepreneur Edge
 
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When it comes to the decision to grow your business through investment funding, there's a lot more that goes into it than the sound bites you see on Shark Tank. In fact, the decision of if and when to seek investors is as complex as it is important.

Experts agree there are pros and cons to both bootstrapping and private funding, and the timing of your decision to do one or the other is also vitally important. Here's some advice from a few local industry experts to help you evaluate which route best suits your company's needs.

Bootstrapping

In the business world, bootstrapping refers to starting or growing your company without external capital.

During his career as an entrepreneur, Manny Chavez, president and founder of Impact Video Cards, has seen the advantages to bootstrapping during certain times of a company's existence. Chavez believes the biggest benefit to bootstrapping is the freedom it gives you as the business owner to chart your own course and make all of your own decisions without "interference from investors."

Justin Bott, director of marketing and operations at Grow Utah, a nonprofit dedicated to helping entrepreneurs, has advised over 1,000 entrepreneurs during his career and agrees that bootstrapping is often beneficial.

"Most people think that raising money will solve all of their problems, but that's not true. Raising money comes at a high cost," Bott says. "Generally speaking, entrepreneurs should bootstrap it as far as they can go. If they do it the right way, they'll get their company far enough down the road to see if their idea is really going to work. They will learn to operate lean and will figure out if their company has a real future."

Investment funding

On the other end of the spectrum is the decision to bring on investors. Raising capital through investors is attractive to many businesses--and with good reason. Having an investor offset some of your costs or provide funds you believe will help grow your business can be an opportunity that is hard to resist. The opportunity for faster growth and the additional skills and experience brought by investors is also desirable, according to Chavez. However, there are many things to consider before going down the path of seeking investment funding.

For example, Greg Warnock, co-founder and managing partner of Mercato Partners, believes you should only raise capital if it is absolutely essential. According to Warnock, situations such as a large inventory component or real...

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