Pros and Cons of Self Funding a Startup

The world of startups is obsessed with funding. The more funds that come in, the bigger a company can grow. But funding from external investors is not the only way a startup can raise funds. It is often assumed that only with an influx of cash will a company be able to float in the market. But a lot of startups these days have also looked at self funding their startups for multiple reasons. We’ve listed out the pros and cons of self funding a startup before you take a plunge into the venture capitalist pool!

Pro #1
You retain 100% control of the company. This means the startup’s mission, product, team and overall responsibility lies on your shoulders. Paying salaries, renting a workspace, office equipment, capital to build a product and everything else falls on the owner till the business is able to break even and generate a profit.

Con #1
The entire responsibility falls on you. If you have a venture capital backing your startup, they provide a cushion for any unexpected fall. But in a self funded startup, the entire team looks up to the owner to help them survive the fall and not crash and burn.

Pro #2
You don’t have to waste time raising funds and can focus on the product. The ultimate goal can be the product and the focus can be on honing your company to be the best in the field. Precious time can be saved from having to get investors approve the product idea and invest the required capital. You have the freedom to grow organically and set your own pace.

Con #2
Your idea might already be built and launched in the market by the time you save enough funds to enter the market space. You’ll not only lose the competitive edge but also the chance to generate a lot of revenue.

Pro #3
Self funding allows you to focus on the essentials. Not having to deal with the whims and wishes of the investors will allow you to develop your product or startup idea in accordance to what you feel is the right path to success. When you’re self funded, you learn to analyze and prioritize and invest money accordingly. You recognize the mistake and rectify them as soon as possible to save money. You learn as you grow and appreciate the smaller wins.

Con #3
Mistakes can be avoided because you have mentors to guide you through the entrepreneurial journey. There’s no need for a trial and error method and networking and connecting with other influential people becomes easier. Having a well respected venture capitalist back your company will not only boost your startup but will also provide credibility.

Now that you know the pros and cons of self funding a startup the ultimate decision rests on how you want to grow and whether you think a venture capitalist will help you achieve your goal better. If you think self funding is the best option for your startup, let us know in the comments below. You can also write us your story at info@startupstories.in