- Think Z
- Posts
- To bootstrap or raise VC money?
The TL;DR:
Let’s Chat D2C: An integrated retail and ecommerce experience.
What I’m Thinking about this Week: Bootstrapping or VC?
The D2Z Podcast: In this week’s episode, I sat down with Patrick Barnes, Co-Founder and CEO of AMP, a suite of interconnected, high-performance solutions for ambitious eCommerce brands.
App Updates & Highlights: Lifetimely by AMP is my go-to platform for lifetime value and cohort analysis.
Upcoming Events: I’m headed to SubSummit in Dallas June 17-19!
Let’s Chat D2C - An Integrated Retail and Ecommerce Experience
In-person shopping is back stronger than ever, and younger generations are prioritizing experiences over material items far more than prior generations, so why should your brand think about opening a pop-up shop (if you don’t already have one) and why is an integrated retail and ecommerce experience critical to maintaining a strong omnichannel customer experience?
Unified Customer Data
Integration allows businesses to collect and utilize customer data from all touchpoints, enabling more sophisticated segmentation, personalized marketing, and improved customer service.
Cross-Channel Sales Opportunities
Customers can buy online and pick up in-store (BOPIS), return online purchases in-store, and more, which can drive additional sales.
Inventory Management
Integrated systems provide real-time visibility into inventory levels across all channels, reducing the risk of stockouts or overstocking and providing better demand forecasting.
Your physical locations can also serve as a mini-fulfillment center.
Loyalty Programs
Reward your customers no matter where they shop from you.
Enhanced Customer Service
Your online customer service team and your in-store associates can be equipped with ALL past customer interactions with your brand to provide more efficient and informed support. They will also be able to allow returns and exchanges no matter where the original purchase took place.
Endless Aisle
Your storefront doesn’t have to have everything - with an integrated retail and ecommerce platform, you can equip your in-store team with the ability to order items online for customers if they are out of stock in-store.
Geo-Targeted Offers
Use location data to send targeted promotions to customers based on their proximity to a physical store, driving foot traffic.
Getting Started with an In-Person Offering
Shopify’s POS Go enables merchants to transact anywhere they have an iPhone or compatible device, not tying them to a physical retail footprint.
Look at your ecommerce analytics to see where your #1 market is of customers to choose where you do your first pop-up.
What I’m Thinking About This Week - Bootstrapping or VC?
For most entrepreneurs, the question of bootstrapping versus VC typically presents itself early on. So, let’s start with the basics of what each entails and some of the decision factors you need to consider.
Do note that I am only speaking about net new companies. If you are an established business deciding whether to raise money or keep bootstrapping, many other variables go into the decision.
Some might say that this question doesn’t apply to previously exited founders, but if you didn’t sell your last business for 9 figures, then you most likely either (a) don’t have the financial resources to take your business to the next level if it’s not in a category that is typically profitable quickly (i.e., SaaS) or (b) don’t want to bet the house (literally) on your next venture and risk the financial resources you’ve acquired to date.
Bootstrapping
Bootstrapping involves starting and growing a business using personal savings, revenue generated from the business, and any other internal cash flow without relying on external investors.
Some of the advantages include:
Control: Founders maintain full control over the business decisions and direction.
Equity Retention: Founders retain 100% ownership of the company, keeping all future profits.
Lean Operations: Encourages efficient use of resources and focuses on profitability early on.
Low Pressure: Less external pressure to achieve rapid growth, allowing more time to develop the business organically.
Flexibility: Greater flexibility to pivot or change the business model without needing approval from investors.
But there are some drawbacks:
Limited Resources: Growth may be slower due to limited financial resources.
Risk: Higher personal financial risk as founders invest their own money.
Scaling Challenges: Difficulties in scaling quickly due to resource constraints.
Stress: While you might have less external pressure, there will definitely be more financial stress on founders, especially if personal savings are depleted.
Venture Capital
Most blue chip companies you are familiar with today, especially technology businesses, raised funds from investors (VC firms) who provide capital in exchange for equity in the business.
The advantages that I see:
Significant Capital: Access to substantial funding that can accelerate growth and scaling.
Expertise and Mentorship: VC firms (at least the right ones and if they are a good fit for your business) often provide valuable advice, mentorship, and connections to help grow the business.
Networking: Access to a network of other startups, industry experts, and potential partners or customers.
Increased Visibility: Association with reputable VC firms can enhance the company’s credibility and visibility.
Rapid Growth: Ability to invest heavily in marketing, R&D, and talent acquisition to achieve rapid growth.
The disadvantages I’ve witnessed in the past couple of years:
Equity Dilution: Founders give up significant ownership and future profits.
Loss of Control: Investors may seek control or influence over key business decisions, potentially leading to conflicts.
Pressure to Scale: High expectations for rapid growth and returns can lead to increased pressure and stress or potentially harmful business decisions.
Exit Expectations: VCs typically expect an exit (i.e., IPO, acquisition) within a short time horizon, which may not align with the founder’s vision nor the companies capabilities.
Selective Funding: VC funding is highly competitive and difficult to obtain, especially for early-stage startups.
Decision Factors
When deciding between bootstrapping and seeking venture capital, consider the following factors:
Business Goals: If your goal is rapid growth and scaling, VC funding may be more appropriate. For steady, controlled growth, bootstrapping could be better.
Industry: Some industries, like tech, often require significant upfront investment, making VC funding more common.
Control: If maintaining control and decision-making autonomy is crucial, bootstrapping is preferable.
Financial Situation: Consider your personal financial situation and risk tolerance when deciding to bootstrap.
Growth Stage: Early-stage startups might start with bootstrapping and seek VC funding after they have proven their concept and need to scale.
My Take - Bootstrapping with Friends, Family, and Strategics
Bootstrapping with additional support from friends, family, and strategic angel investors ($50-$500K) is the hybrid approach that I think is the best and that I am actively employing at SCALIS.
In my opinion, bootstrapping inherently forces you to think about the business model and how you will make money versus a new startup with a couple of million dollars in the bank prioritizing growth and not realizing how quickly that cash will burn up.
Bootstrapping also gives you FAR more optionality. If you want to turn your business into a lifestyle business (or if it just is not meant for scale), you can do that! Raise VC money, and that’s no longer an option.
I’ve also seen too many businesses that could have been GREAT standalone businesses if they hadn’t made decisions that were influenced by the expectations of raising a significant amount of money.
Ultimately, there’s not a one-size-fits-all solution here, and the media tends to look at the outliers in each category — the bootstrappers like Mailchimp and Zapier, which are billion-dollar companies, as well as the VC darlings like Snapchat.
This Week’s The D2Z Podcast
#107 – Transforming Ecommerce with Patrick Barnes
🎧 Listen Now 🎧
In this week’s episode, I sat down with Patrick Barnes, Co-Founder and CEO of AMP, a suite of interconnected, high-performance solutions for ambitious eCommerce brands. Specifically, we explored the following:
💰 Leveraging detailed customer data to improve service offerings and tailor marking efforts to improve customer lifetime value
📲 The future of retail and ecommerce integration and the value of a consolidated tech stack in creating a cohesive customer journey
😎 The financial aspects of entrepreneurship and the implications of raising venture capital versus bootstrapping
🚀 Leadership in a remote-first company
App Highlight - Lifetimely by AMP
What is it: Lifetime Value and Profit Analytics
Differentiator: Lifetimely allows you to examine your customers' lifetime value and other behaviors. Its in-depth features, functionalities, and data enable you to make better-informed decisions across your business.
Starting Price: $19/month
How we use it: For cohort, retention, and LTV analysis.
Stay tuned for the next newsletter, where I’ll share a deep-dive walkthrough of the platform and how you can leverage it for your ecommerce brand.
Upcoming Events
I’m headed to SubSummit in Dallas June 17-19!
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