Venture Capital is one of the most popular and celebrated ways to start a company. Venture Capital has backed some of the most successful startups from Snapchat to Facebook and is a great way to get a ton of upfront cash to finance your business operations.
But, is it always the best option? It’s necessary to consider that every round of VC funding dilutes the amount of stock and company you and your employees own, essentially decreasing your say in future decisions as well as your future financial payout in exchange for cash in this moment.
There are other ways to finance a company, ways that don’t decrease your ownership or decision-making power, and we’ll cover them below:
Grow at a slower rate than your revenue allows
The number one option that I would recommend to all founders, is to grow your costs more slowly than the revenue coming in.
If you’re able to keep your business profitable at all times and keep growing, soon you’ll be a big company. Best of all, you’ll be a profitable big company, and you’ll still own 100%. You’ll be making more than if you’d relied on Venture Funding to get you to the place you are today and you’ll still own all of the company.
This can be frustrating for some people, as they want to grow more quickly, hire more employees, or spend more cash on things right away. However, this is not always necessary and can be more hurtful than helpful in the long run, as Venture Funding runs out, and if money was not being spent efficiently or toward true growth, the company is now in debt with a ton of liabilities whereas it could have been profitably growing at a slower pace using more efficient methods all along.
Paradoxically, your company has more of a chance of succeeding if you support it with itself, and the revenue outpaces cost the whole time, as opposed to growing through artificial Venture Capital, and then running out of money because it was not spent efficiently, and having to go out of business.
Other ways to get funding
If your company absolutely needs funding there are other ways to get it without relying on Venture Capital.
Use a credit card
If you think you’ll be able to pay off the credit card before the high interest rates kick in, go for it, however this is risky as credit card payments end up being much more expensive than simply spending within your means.
Take out a loan
Loans can be another option, especially for small business equipment. They can also help you get lower rates than many credit cards, but it is still best to only get loans when you know you’ll be able to pay them off in the short term.
Keep your spend small
The #1 tip to start a business without outside funding is to spend within your business’ means, meaning revenue should always be higher than costs. As long as you do that, you’ll be able to grow your business slowly and steadily without losing shares or decision power.