How things change when you transition from being a bootstrapped to a funded company

24th Nov 2015
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When a business that started by adopting the bootstrapped route goes on the table for venture-backed funding, the rules of the game change. Business needs to sustain and grow, but the situation on ground and the resources available change significantly. It is important to understand the difference, and align business goals and strategies to benefit and fuel the newly funded company.

The most obvious change is there is a lot more money at hand than before. However, the money from investors comes saddled with high expectations and this will impact every business decision henceforth. The key is to turn these expectations to your advantage.

bootstrapping_funded

Image credit "ShutterStock"

 

Here are some changes that you need to adapt to when you get funded, to turn the situation in your favor:

  • Time is the new ‘money’

Whilst there was paucity of money when you were bootstrapped, the funding has put that worry at bay. The new crunch is of time, not money. You now have to move on full-throttle to yield profits on investments in the shortest possible time. Your business goals, decisions, directions and strategies, all have to be valued carefully against the investment of time. Hence, you need to weigh the odds against the gains with time as a key element along with projected risks and returns.

  • More money in hand

Having more money means that now you can afford to experiment and take on more risks. You can try out various alternatives and then select the option which seems most feasible and profitable.

Above all, the additional funds can help you scale up and take your business to greater heights across geographies.

  • Hire a bigger and better team to realise your goals

You can now hire more people and above all, hire better qualified professionals to help realise your vision, since you are in a position to pay better salaries. With the right people to handle different aspects of the business, you will be in a better position to delegate work and focus on the strategic aspects of the business, which can help steer the business on the right course.

  • Access to a whole new network

Your investors bring in capital, no doubt. But they also expose you to a whole new world of business contacts. Their network of connections gives you an available audience including highly-placed and coveted leads. They will happily introduce you to their trusted links and if leveraged well, it can be a huge advantage.

  • More muscle

As a bootstrapped company, if you were just putting in blood and sweat, things will be easier as a funded company since you can complement your efforts with money. Your increased bank balance will give you the power to move forward faster.

  • Better credibility in the market

You will have more willing customers and clients ready to listen to you, since with funding comes a huge stamp of approval for your product or idea. It proves to your potential clients that your idea has steam since there can be no bigger validation for a startup that having a third party put their money behind your idea/product. It’ll be easier to make inroads in the market and improve the prospects of your business.

  • Stakes are now high

Your stakeholders have now increased manifold, and you need to take this into consideration. If you have hired more people, you now have more dependents whose future depends on the fate of your business. Your investors also have high stakes in your venture, and it can bog you down since you have been used to having a free hand earlier. However, it is important to take these inevitable changes in your stride and move ahead confidently.

  • Focus on creating value rather than making profit to sustain

Businesses that create value and not just make money are the ones that go down well with customers and sustain in the long run. With funding in hand, you can now put your energies into creating value that is unique to your venture.

Conclusion

Funding is not diametrically opposite to bootstrapping. It is just a complementary approach that will help change your idea into a successful business. It is really important that you find investors who are on a similar page as you, so as to enable a smooth transition to the funded mode. At the same, it is extremely important that you adjust to the newer ways of working and make changes for the better in order to benefit both the business and the stakeholders involved. And yes, the sooner you adapt, the better it is for everyone involved!

References

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