Many entrepreneurs look to investors to help grow their business. Instead of taking a loan that they have to pay back, they are willing to give up some ownership of their company (equity) in exchange for cash. But what do investors really look for in a company they want to invest in??
In an ideal word, you would be able to start your business with your savings or maybe a gift from your father or mother. You would get to profitability before the money runs out and reinvest those profits to grow your business. In this scenario, you maintain 100% ownership and you do not have expensive debt to finance. Unfortunately, for most of us, we need to take some outside capital grow our businesses. But how should you do it? Debt or equity?
What is bootstrapping?
Bootstrapping is a term that originated in the 1800’s in the United States. It came from an idiom to pull oneself over a fence by pulling up one’s bootstraps (the loops at the top of tall boots to help you pull them on). Think about that. Go stand in front of a fence and pull up on your shoes as hard as you can. Will you ever be able to pull yourself over? What started out as a phrase to describe the impossible, today it means to start something with your own means.