The post was originally published in Polish on Szymon’s LinkedIn profile. Szymon kindly agreed to republish what we think is of great value to our readers.
Szymon Janiak, Co-Founder & Managing Partner at Czysta3.VC
The way the discussion about whether to raise capital from a VC fund or bootstrap goes is complete nonsense in most cases. In those that I observed, the main proponents of bootstrapping were people who, for various reasons, could not receive funds from investors. For example,
- marketing agency owners who, as a rule, just don’t fit into the classic VC trend;
- former founders who for a year sang carols all over the market and no one gave them capital;
- former e-commerce owners who forced themselves into start-ups.
If you add to this the market narrative where the founder is David and VC is Goliath, VC funding doesn’t look too favorable. Statistics are also important here – a VC invests in 1% of companies that it analyzes on average, and 99% get refused. It is clear that the superiority of self-financing is doomed to win under such circumstances.
However, this subject is extremely important and the dispute itself is extremely valuable – because there are cases where it’s better to go the VC way, but there are also those in which bootstrapping will be more beneficial. The simplest answer to the question ‘which one is better?’ is ‘it depends’, and I strongly believe it is the only right one. However, it is worth focusing on what premises should determine the following of each path. It’s worth talking about. On the other hand, the discussion should be up to the people who had an actual choice. Entrepreneurs whose business framework assumed both options and, for example, had term sheets on the table but didn’t end up signing them for whatever reason. Ideally, there should also be people who developed one company with the investor support and another one on their own.
Meanwhile, the discussion is dominated and the views in this area are still woven by founders, for whom it is a form of self-therapy or self-justification and convincing themselves that it is actually good that it turned out the way it did, that they have no investors. And this, in turn, distorts the real perspective. There is a clear lack of commonsense, and everyone loses, regardless of their views.
The comment section debates:
Well, our business didn’t fit VCs, but some financing options appeared along the way. We were completely bootstrapped, and these financing options came up when we already had a running business.
We still had a choice – to take the money or continue as we did. An important question arises – ok, what will this money give us? Will putting xxx of any currency into the business increase sales? How? Will the investor contribute something substantial to the company contacts or any other non-financial leverage, which will improve us?
The answer was no, so the offers went off the table.
We built our second company organically as well, it was also bootstrapped, although it was more in line with what VC might want to finance. Only the question still stands – for what should we give % of shares? What does it bring to our company or its potential?
So I wouldn’t exaggerate with this self-therapy.
Another angle – VCs have created the image of sprites that desire companies. What does VC bring besides capital?
The founder should ask honestly:
- what will VC bring besides capital?
- if I take their capital, what will it give me?
- if I don’t, will I die or just develop more slowly?
- how do I benefit from giving up some control over the company?
That’s how it goes.
– Tomasz Onyszko, CTO at Predica Group
But such generalizations are also nonsense, right? It is a pity that a potentially interesting discussion is opened with such an approach.
– Grzegorz Róg, Co-Founder at eduweb.pl, Ahoy.so, SystemFlow, easycart, Zencal, Automation House
If more than 99% of interested parties should not participate in the discussion, who and what should be discussed? VC with VC?
– Krzysztof Górecki, CEO at THB Systemy Informatyczne
Szymon Janiak is an investor and a business-driven Managing Director at czysta3.vc, a Venture Capital fund located in Poland. He has over 10 years of experience in the technology sector. Szymon is also a Member of the Supervisory Board at stockbroker Grupa Trinity S.A.
