Sitemaps
Should Kids Follow in Our Founder Footsteps?
The Evolution of Entry Level Workers
Assume Everyone Will Leave in Year One
Stop Listening to Investors
Was Mortgaging My Life Worth it?
What's My Startup Worth in an Acquisition?
When Our Ambition is Our Enemy
Are Startups in a "Silent Recession"?
The 5 Types of Startup Funding
What Is Startup Funding?
Do Founders Deserve Their Profit?
Michelle Glauser on Diversity and Inclusion
The Utter STUPIDITY of "Risking it All"
Committees Are Where Progress Goes to Die
More Money (Really Means) More Problems
Why Most Founders Don't Get Rich
Investors will be Obsolete
Why is a Founder so Hard to Replace?
We Can't Grow by Saying "No"
Do People Really Want Me to Succeed?
Is the Problem the Player or the Coach?
Will Investors Bail Me Out?
The Value of Actually Getting Paid
Why do Founders Suck at Asking for Help?
Wait a Minute before Giving Away Equity
You Only Think You Work Hard
SMALL is the New Big — Embracing Efficiency in the Age of AI
The 9 Best Growth Agencies for Startups
This is BOOTSTRAPPED — 3 Strategies to Build Your Startup Without Funding
Never Share Your Net Worth
A Steady Hand in the Middle of the Storm
Risk it All vs Steady Paycheck
How About a Startup that Just Makes Money?
How to Recruit a Rockstar Advisor
Why Having Zero Experience is a Huge Asset
My Competitor Got Funded — Am I Screwed?
The Hidden Treasure of Failed Startups
If It Makes Money, It Makes Sense
Why do VCs Keep Giving Failed Founders Money?
$10K Per Month isn't Just Revenue — It's Life Support
The Ridiculous Spectrum of Investor Feedback
Startup CEOs Aren't Really CEOs
Series A, B, C, D, and E Funding: How It Works
Best Pitch Decks Ever: The Most Successful Fundraising Pitches You Need to Know
When to Raise Funds
Why Aren't Investors Responding to Me?
Should I Regret Not Raising Capital?
Unemployment Cases — Why I LOOOOOVE To Win Them So Much.
How Much to Pay Yourself
Heat-Seeking Missile: WePay’s Journey to Product-Market Fit — Interview with Rich Aberman, Co-Founder of Wepay
The R&D technique for startups: Rip off & Duplicate
Why Some Startups Win.
Chapter #1: First Steps To Validate Your Business Idea
Product Users, Not Ideas, Will Determine Your Startup’s Fate
Drop Your Free Tier
Your Advisors Are Probably Wrong
Growth Isn't Always Good
How to Shut Down Gracefully
How Does My Startup Get Acquired?
Can Entrepreneurship Be Taught?
How to Pick the Wrong Co-Founder
Staying Small While Going Big
Investors are NOT on Our Side of the Table
Who am I Really Competing Against?
Why Can't Founders Replace Themselves?
Actually, We Have Plenty of Time
Quitting vs Letting Go
How Startups Actually Get Bought
What if I'm Building the Wrong Product?
Are Founders Driven by Fear or Greed?
Why I'm Either Working or Feeling Guilty
Startup Financial Assumptions
Why Every Kid Should be a Startup Founder
We Only Have to be Right Once
If a Startup Sinks, Founders Go Down With it
Founder Success: We Need a Strict Definition of Personal Success
Is Quiet Quitting a Problem at Startup Companies?
Founder Exits are Hard Work and Good Fortune, Not "Good Luck"
Finalizing Startup Projections
All Founders are Beloved In Good Times
Our Startup Culture of Entitlement
The Bullshit Case for Raising Capital
How do We Manage Our Founder Flaws?
What If my plan for retirement is "never retire"?
Startup Failure is just One Chapter in Founder Life
6 Similarities between Startup Founders and Pro Athletes
All Founders Make Bad Decisions — and That's OK
Startup Board Negotiations: How do I tell the board I need a new deal?
Founder Sacrifice — At What Point Have I Gone Too Far?
Youth Entrepreneurship: Can Middle Schoolers be Founders?
Living the Founder Legend Isn't so Fun
Why Do VC Funded Startups Love "Fake Growth?"
How Should I Share My Wealth with Family?
How Many Deaths Can a Startup Survive?
This is Probably Your Last Success
Why Do We Still Have Full-Time Employees?
The Case Against Full Transparency
Should I Feel Guilty for Failing?
Always Take Money off the Table
Founder Impostor Syndrome Never Goes Away

The Benefits of Not Raising Capital

The Startups Team

The Benefits of Not Raising Capital

Any entrepreneur trying to fund their startup is well aware of the benefits of raising capital. Large cash infusions enable you to reach the market quicker, add more resources, and launch with a burst of speed.

But are there any benefits to not raising capital? What happens when you avoid taking on capital and take your time to build a company?

There are lots of hidden benefits to building slowly, although that doesn’t necessarily mean that it’s the best way to grow. More important is how you consider the benefits of avoiding capital and use them to your advantage.

Avoiding Dilution

If you refrain from taking on investors, you keep more equity. It’s an obvious truth that can be difficult to reconcile with the aforementioned benefits of taking on investors. So what’s the difference between a good decision and a bad one when it comes to investment?

Timing.

Your formative years leave you pretty vulnerable to heavy dilution because you have very few assets to leverage. The further you can push the company ahead without raising capital, the stronger your position will be with investors down the road. Sometimes even getting as far as incorporating the company, identifying the first few key employees, and creating a simple demo version of the product can create a lot more value in a short period of time.

In many ways, the time you spend without capital is an investment in retaining equity later on.

Forcing Focus

Avoiding capital can also help you find discipline and focus in your venture. Being broke means being disciplined. When you’re broke you can’t afford to work on several disconnected ideas. Singular focus is required to produce cash. If you don’t, you won’t be around long enough to entertain shifts in direction!

Don’t get me wrong – money doesn’t always enable distraction.

But knowing that diversion of focus could keep you from getting your next paycheck is a powerful incentive to stay on task! In fact, being acutely focused, whether you like it or not, will end up saving you an incredible amount of cash along the way.

Maintaining Control

Bear in mind that when you take an investor’s money, no matter how much of the company you may own, you still have lost some control. Ideally, none of this matters. Your interests are perfectly in line with the investor’s and the two of you live happily ever after.

If only that ever happened.

The interests of investors and entrepreneurs can vary as slightly as the color of your new logo or as greatly as the direction of your entire company. The longer you hold out and avoid capital, the longer you can maintain control of your destiny.

Refining the Vision

Time spent without capital is time to refine the vision of your company and your product before accelerating the business with money.

Contrary to popular belief, most companies don’t start with a perfect idea and run forever on that single plan. PayPal, who incidentally raised lots of money, went from designing software for transferring money on PDAs to powering payments for eBay auctions. Their change in direction was a smart response to new market opportunities that surfaced after they launched.

You’re far better off raising money once you’ve had time to test your product and vision to ensure you’re raising money for the right strategy. Investors understand that changes are inevitable, but if you go ask for capital in the formative stages, you may look unreliable when you communicate your constantly changing needs to them.

You may also find that your initial approach to launching the company required a lot of capital, yet as your vision evolves, newer approaches require little or no capital. Delaying investment gives you breathing room to work through strategies that may save you money (and equity).

When to Stop Waiting

All of these benefits assume one thing – that your business can afford to wait for capital!

There are lots of situations where waiting for capital just isn’t an option. You may be trying to open a restaurant, manufacture a product, or launch your new Internet company before another fast-paced competitor. In these cases, raising money is the only option.

Many companies also think capital is only for starting companies. But nothing gets an investor more excited than investing capital in order to grow an existing company. When your past experience implies a successful future, investors are more likely loosen the purse strings.

Summary

The best strategy is to go as far as you can, as long as you can, without raising capital. This will allow you to get a full handle on the business. You should only start making the rounds when you are at a point where not having capital is an absolute road block to your development, or you are forgoing far too much opportunity to avoid raising capital.

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