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- Beware of the revolving-door venture capitalist
- Getting an investor to move from “not now” to “yes”
- Talk to your venture capitalist before you crash and burn
- Entrepreneurs need to know when to call it quits
Exploring start-up funding options? Choosing between bootstrapping vs. venture capital can shape your start-up’s future
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Most people in the entrepreneurial space—whether building, supporting or funding early-stage companies—assume attracting investor capital is a normal step in business growth.
Many founders believe that once they launch a business, raising capital is simply part of the plan. Some start crafting investor pitches before they even have a working product. For many companies, this makes sense: launch, gain traction and then secure funding to scale.
But in some cases—especially in the tech sector—this approach can be unnecessary, or even harmful. Entrepreneurs exploring start-up funding options should carefully consider whether seeking investment is the best path or if there are better alternatives.
Sometimes the best way to finance growth isn’t through investors, but through sales. If you can sell, you can generate cash flow and grow on your own terms. If you can’t sell, you likely won’t attract investors anyway.
Take, for example, an entrepreneur who needed to rebuild software for a new operating system. Instead of raising funds to cover development, he approached a large company that would benefit from the updated product. He negotiated a contract that covered his costs, allowing the company to access the product at a reduced rate while giving him a fully built product he could then sell to others.
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This approach is even more relevant today. The start-up funding options landscape has shifted since 2021, with venture capital investment slowing significantly. Canadian start-ups are facing a tougher funding climate, with fewer rounds, lower valuations and greater emphasis on profitability over rapid growth.
At the same time, investors have become more interested in traditionally low-margin sectors, such as accounting and logistics, as artificial intelligence increases efficiency and profitability in these industries. Start-ups that can generate early revenue through strategic sales are finding themselves in a stronger position than those relying solely on outside capital.
One of the key decisions founders face is bootstrapping vs. venture capital. Raising capital can accelerate growth, but it comes at a cost—ownership dilution. A founder who keeps 100 per cent equity and sells their company for $1 million after five years is often better off than one who gives up 75 per cent and sells for $3 million.
Some entrepreneurs resist giving up equity altogether. Others overvalue their company so much that experienced investors won’t touch the deal. The key is understanding a business’s true potential.
Many tech founders dream of a $500-million exit, but not every company is built for that. If a business has that potential, owning 25 per cent of something large may be better than owning 100 per cent of a cash-starved company that never scales.
Entrepreneurs must also consider whether they need to be first to market, whether better-funded competitors could overtake them, and whether they are building a business to sell or simply creating a lifestyle company. If the goal is to build a comfortable business that supports management, investors won’t be aligned with that vision. If the plan is to grow fast and exit, then raising capital might make sense.
The best way to decide between raising capital and bootstrapping is to model both paths. Smart entrepreneurs create two sets of financial projections—one showing growth with existing resources, the other reflecting growth with investor capital.
It is a mistake to assume that the funded scenario is always better. Investment—whether debt or equity—has a cost. If that cost outweighs the value the capital brings, the business suffers.
Successful entrepreneurs find the balance: minimizing capital costs while maximizing value creation. As a company grows and debt becomes an option, the trade-offs between equity dilution, debt financing and organic growth become even more critical.
This is particularly important in Canada, where start-ups have less access to venture capital than their U.S. counterparts. In 2023, start-up failures rose significantly as companies that had relied on investor funding ran out of cash.
Meanwhile, those who focused on generating revenue—through customer acquisition, government grants or strategic partnerships—proved more resilient. Canada also has strong government support programs, such as the Industrial Research Assistance Program and the Scientific Research and Experimental Development tax incentive. These programs help tech companies fund research and development without giving up equity.
Shopify, one of Canada’s biggest tech success stories, offers a valuable lesson. The company was bootstrapped in its early years, using customer revenue to fund operations. Shopify only sought investor funding once it had established a strong business model and proven growth potential. By waiting until it had leverage, Shopify was able to negotiate better terms and maintain more control over its future.
For entrepreneurs deciding between bootstrapping vs. venture capital, it is essential to weigh the pros and cons of bootstrapping. While bootstrapping provides full control and avoids dilution, it often means slower growth. Venture capital, on the other hand, allows for rapid expansion but comes with investor pressure and the risk of losing decision-making power.
Entrepreneurs often celebrate closing a round of funding. But after the party, pressure sets in.
Before, the company was sustained by personal investment and revenue. Now, investors have a stake, and they expect results. That pressure follows the founder to bed every night.
One entrepreneur sought advice when his company hit a cash crunch. When asked if he would invest in a struggling company with no turnaround plan, he admitted he wouldn’t.
Instead of chasing more investment, he focused on selling. Revenue increased, payables decreased, and for the first time in months, payroll was made on time. Employees stopped leaving. Morale improved. Customers regained confidence. The company stabilized—not through investment, but through sales.
For those asking how to fund a start-up without investors, the answer often comes down to driving revenue. Selling is an underrated skill in the tech world. We celebrate breakthrough technology, but even the most advanced product is worthless if no one sells it.
Investor capital can be helpful. But sometimes, selling is what a business truly needs.
In today’s economic climate, where start-up funding options are harder to secure and expectations for profitability are rising, Canadian entrepreneurs need to be strategic. Those who sell first and fundraise later—or avoid fundraising altogether—will be in a stronger position than those who assume venture capital is the only path forward.
Warren Bergen is the author of Swagger & Sweat, A Start-up Capital Boot Camp.
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