Being an "entrepreneur" is almost fashionable these days. Toronto, never a major powerhouse in the tech industry, is awash with more money than it has ever seen before. Investors are doling out money to promising companies, with juggernauts like Google, Facebook, and MSN in the wings, ready to acquire interesting technologies and smart teams.
I am an entrepreneur who bootstrapped his first company more than a decade ago, and it has been interesting to see Toronto's startup world mature. My latest company, Examine.com, was also bootstrapped. Almost five years later, it garners more than 40,000 visitors a day, generates seven figures a year, and it's profitable. As such, we've had quite a few angels and investors come to us, ready to invest in a business with a positive cash flow and pristine reputation.
I tell my friends about the approaches, and they all congratulate me. In their eyes, I've got it made. I'll take a few million, expand the operations, juice up revenue and, within a few years, I'll sell out, cashing an eight-figure cheque. It's the 21st -century success story – build something, gain a bit of traction, get an infusion of cash and then sell out and become famous.
Yet I retain complete ownership of my company, and have never taken a cent in investment money.
It's so easy to get dazzled by the upside that few people look at what you give up on. While in no way against funding (it is critical in some situations), I wanted to outline a few things that would warrant consideration before accepting funding:
1. How badly do you need the cash? Having bootstrapped Examine.com to profitability, the company is not in a situation that it cannot meet its financial obligations. With money in the bank for at least another year (if revenue fell to zero), ask yourself: Do you even need the money?
2. What's the endgame? Right now, the startup world is abuzz about unicorns – companies valued at a minimum of a billion dollars. But is that something you really want? Do you want to build a disruptor? Or do you want to build a small company that does what it does best?
3. Are you willing to lose control? As the majority owner of Examine.com, I don't need to worry about anyone else's opinions (for better or for worse). I don't need to worry about keeping investors happy or making sure the board is happy. I am the decision-maker.
4. Is your share of the pie big enough? Raise enough capital (especially when your own company's value is low) and have enough co-founders, and the threshold on how much money the company has to sell for before you make back your money goes up. Sure, 10 per cent of $100-million is bigger than 100 per cent of $5-million – but are you confident enough you'll get to $100-million? You hear about the success stories, but companies are far more likely to fail.
5. How much time do you have? Venture-capital-backed startups are notorious for sucking up your time. Many consider it a badge of honour when you sleep where you work.
6. What are your goals? I think this is what too many people forget about – what do you really want from your business? For me, it was freedom. The ability to go for an hour long walk with my dog. The convenience of taking dance classes in the middle of a weekday. The luxury of heading over to Kensington Market to shop for groceries on a lazy weekend.
At the end of the day, I operate a business to help provide for my lifestyle. Taking external funding would have brought upon external forces that would have made it harder for me to enjoy my lifestyle.
I'm here to make a dent. I don't need to dominate.