External Funding vs Organic Growth
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on June 9, 2010
There’s been a lot of talk in the blogosphere this month on the topic of organic growth or bootstrapping vs taking external money (ie, VCs, Angels, public listings, etc).
I think this is mainly fueled by Tony Hsieh talking on inc.com on “Why I sold Zappos” and Sridhar Vembu’s post on why Zoho haven’t taken VC money.
A couple of the articles have referenced my company, KashFlow, directly.
- At KashFlow, we’re bootstrapped – spending only what we make.
- Our main competitor is a publicly-listed company that has raised a LOT of money from the markets and is spending it very quickly (to great effect I might add).
- Another established competitor is trying to raise €5m to fund growth
- A small startup recently announced a “financing deal” from “strategic investors”. No names or amounts.
I had quite a lengthy conversation with Ben Kepes at CloudAve which resulted in this post – I won’t repeat everything I’ve said there but I do encourage you to go read it if you’re interested in why we didn’t look for big money early on and haven’t since.
I would however add a P.S. to my comments to Ben:
I’m not against the idea of VC money entirely. It has it’s uses. But not for us, not right now.
A time may well come when it’s the sensible thing to do for a number of reasons or an attractive deal may present itself. That might be next month, next quarter or next year. But right now, we don’t need external money to execute our strategy so I’m not getting distracted by looking for it.
The only reason for taking money right now would be to get Mike Butcher at TechCrunch to give us some exposure and a massive spike of traffic.
Update: Mike picked me up on my closing comment above. He also flagged up an interesting post he made a couple of years back about how to get coverage on TechCrunch and other media outlets. Well worth reading in full.
4 Responses to External Funding vs Organic Growth
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This is a kick ass way to start a business. It’s shocking that it has taken so long for ‘bootstrapping’ to be back in style. It proves that many small businesses don’t actually need banks and investors to get their business started – they just need to build a useful product that makes money.
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At Connect2Field we have been approached by VCs funding but we also believe that Bootstrapping is the way to go.
Building a business by bootstrapping means you have to focus on your customers as they are going to pay your bills so you can continue. This then means you are building a business which focuses 100% on the customers which in the long will mean you build a successful business.
It’s like anything if you are spending your own money you are careful at how you do it, if you are spending others you are less careful. Getting VC money will allow you to ramp up very quickly and burn through
money at a rapid rate this doesn’t necessarily mean you are building a long term successful business.If your a startup, suck it up and bootstrap it… You enjoy the glory once you push through some hard times and come out owning a successful profitable company.
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See what all the fuss is about
Both Kashflow and Xero have gone about business in completely different ways, yet both are outstanding pieces of software that put to shame everything that has existed over the last 10 years.
Great work guys, keep it up