Cayenne Consulting

Most Startups Don’t Need Investors

Small Business, Big Vision: Lessons on How to Dominate Your Market from Self-Made Entrepreneurs Who Did it Right

There is so much written these days about how to attract investors that most entrepreneurs “assume” they need funding and don’t even consider a plan for “bootstrapping,” or self-financing, their startup. Yet, according to some sources, over 90 percent of all businesses are started and grown with no equity financing, and many others would have been better off without it.

According to a new book, “Small Business, Big Vision,” by self-made entrepreneurs Adam and Matthew Toren, it’s really a question of need versus want. We all want to have our vision realized sooner rather than later, but it can be a big mistake to bring in investors rather than patiently building your business at a slow, steady pace (organic growth).

In fact, most of the rich entrepreneurs you know actively turned away early equity proposals. Too many founders are convinced they “need” equity financing, for the wrong reasons, as outlined in the book and supplemented with a bit of my own experience:

On the other hand, there are clearly situations where your needs call for investors. Even in these cases, all other options should be explored first:

When deciding whether and how an investor can help you, remember that finding outside investors requires a huge amount of time and work, perhaps impacting your rollout more than working with alternate approaches and slower growth. Perhaps you really need an advisor rather than an investor.

Even under the best of circumstances, working with an investor requires some give and take. More likely, you now have a new boss – which may be counter to why you chose the entrepreneur route in the first place. Maybe that’s why bootstrapped startups are the norm, rather than externally funded ones. You, alone, get to make the big decisions on your big vision.

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