The False Choice Between VC and Bootstrapping

There seem to be two basic camps in startup land, each talking their own book. The venture capital industrial complex churns out dazzling tales of lottery ticket winners — errr — I mean hard-working well-deservers, in hopes to inspire “go big, or go home” risk taking that fuels their system. Camp Bootstrapper is a curious mix of contrarians, jilted former high-fliers, and lifestyle advocates who profess to have “seen the light” and view investors mostly as vampires with checkbooks, prowling for naive, fresh meat.

Newsflash: as you already intuitively know, neither is close to accurate. In fact, both advocations prescribe situationally-dependent advice, rife with confirmation bias, which is almost never helpful.

The truth is that making money almost always requires having money, but some business models are more capital efficient than others. I’ve watched a bootstrapped company go from zero to almost 2000 employees and hundreds of millions of dollars of revenue. That was fun. I’ve also witnessed successful companies that could only exist with huge, on-going fundraising. Neither model is correct. It’s all about opportunity costs, or what you’re giving up, and capital intensity, or how much cash the company requires to scale.

For the entrepreneur, a VC path sacrifices ownership, control, and optionality for speed, scale, and expertise. You’ll be forced to raise, grow, raise, grow, rinse and repeat until a buy-out, or IPO. Remember, VCs need fund liquidity, so it’s virtually impossible to build a permanently independent private company. In theory, while your slice gets ever-smaller, the pie gets much bigger, and your expected value skyrockets. If it’s a winner-take-all market, which is rare, it’s the only choice. Opt out and you’re going to get taken behind the wood shed.

There are some incidental perks on this path including the rare experience, a boatload of personal branding, and access to interesting, famous, and important people. If your high-flying startup flames out and you didn’t do something extraordinarily stupid, there’s a decent chance you can soft-land somewhere fairly nice. Remember, VCs bury their dead quietly.

In almost every way, the bootstrapper’s logic is exactly the opposite, hence the seeming false choice. You’re in complete control with the vast majority of the economic upside. Your options are unlimited and you’re beholden to no one. Freeedooom! If you get product-market fit in a business that does’t require increasing amounts of capital to grow, the rewards can be outsized. But, those situations are rare and most organizations end up under-resourced and vulnerable.

The bootstrapper’s challenges are recruiting and retaining smart people, buying stuff you need, failing to identify tax, legal, or regulatory land mines, and toiling away in obscurity. You know, everything it takes to be successful. Your goal should be to avoid the default case of an anonymous, cash-strapped small business running ever-faster to inch forward, at best. It’s excellent at nothing, claims to be good at everything, and exerts enough brute force to provide a meager existence for it’s small group of employees.

For 99%, the correct path is between the two extremes, and again, it comes down to opportunity costs. Without writing a Dr. Seuss book, it’s safe to imagine that outside investors come in every flavor imaginable. There are nice ones and assholes, smart ones and mouth breathers, real connectors and real pretenders. Some like early-stage and others prefer mature businesses; some write big checks, while others toe-dip in lots of shallow ponds; some are cutting edge, while others cling to Blackberries; some have LPs, while others use their own money. Some might even have a little real expertise.

The point is to quit paying attention to broad platitudes from “thought leaders” and think for yourself. If you need money, go find it on acceptable terms, knowing you can’t get something for nothing. If you need specific expertise, go get it. If you think the idea can “go big,” understand the consequences. If you dream of creating your own job in the middle of Idaho, then for goodness sakes don’t try to launch an Uber competitor.

Brent Beshore is the founder and CEO of, a family of companies throughout North America. Read more of Brent’s writings on investing, operating, risk, and not being an asshole. Connect with him on Twitter or LinkedIn.