When you start talking with founders about building companies, two terms come up a lot: bootstrapping and raising capital. They’re both ways to fund a business, but they mean pretty different things.
Bootstrapping is when you use your own savings, income from early sales, or sometimes a credit card to fund everything. On the other hand, raising capital typically means getting money from outside investors—like venture capitalists, angel investors, or even crowdfunding.
If you’re figuring out which is right for you, it helps to understand how each works, why people pick one over the other, and what you might be signing up for if you choose a side.
What Bootstrapping Really Means
Bootstrapping is all about doing things with what you’ve got right now. It might start with using some family savings, “living lean,” or finding a first customer who pays upfront. Some early-stage companies sell their product or service before it even exists, just to get enough cash to finish it.
People bootstrapping often take on lots of roles themselves—from sales to product to accounting. Sometimes they take side jobs to cover rent or get by without hiring. It can be stressful, but it gives you a lot of independence.
The upside is obvious: You own 100% of your company. You call the shots. No one is pushing you to scale overnight or reporting back to a board. This setup can work surprisingly well, especially when your idea doesn’t need a ton of upfront cash or can bring in revenue fast.
How Entrepreneurs Bootstrap Day-to-Day
Most bootstrap founders try to minimize expenses. For instance, they may use free or cheap software. Some choose co-working spaces over private offices. Others skip fancy marketing campaigns in favor of creative, grassroots outreach.
Another common move? Founders do the work themselves first—everything from website building to customer support. Later, as money comes in, they might bring on contractors or part-time help.
Some businesses even offer pre-sales or run workshops to get cash in the door early. Every dollar counts because it’s coming out of the team’s own pockets.
Why Bootstrapping Appeals To So Many
The first big reason is control. When you don’t answer to anyone else’s money, it’s your vision that shapes the business—not a metric set by investors.
Second, there’s less risk of losing your company if things go sideways. If you don’t owe outside investors, you won’t have to sell the business or take drastic steps just to keep others happy.
Also, moving carefully with your own money often means you’re less likely to make huge, expensive missteps.
But the tradeoff is real: Growth might be slow. If your competitors are raising millions, it’s tough to keep pace with marketing, talent, or tech. Sometimes, bootstrapped businesses miss windows of opportunity simply because there aren’t enough resources.
What It Means To Raise Capital
Unlike bootstrapping, raising capital means inviting others to buy a piece of your company in exchange for their cash. This can come from different places. Angel investors are often wealthy individuals who fund early-stage companies, sometimes just because they believe in the idea or the person. Then there are venture capitalists—professional investors who write bigger checks and expect bigger returns. Crowdfunding, where you raise small amounts from a lot of people, has become popular, too.
People go this route when their company needs to move fast or when the idea is too big for them alone to fund. It’s not just about getting cash—it’s about unlocking resources and networks you might never tap otherwise.
Bigger Backers, Bigger Bets: The Perks Of Outside Funding
So what does raising capital get you? For starters, speed. With extra cash on hand, you can hire faster and build teams that take your product to market quickly.
It also gives you access to mentorship, connections, and expertise that most founders just don’t have, especially if investors are active in the business. Investors may open doors to future funding rounds as well.
And finally, raised capital lets some founders handle riskier bets—say, launching in new markets or spending on R&D that might take years to pay off.
But it doesn’t come without strings. You’ll have less equity with every round, and control starts to shift. Outside investors will want transparency and, often, a seat at the table. Suddenly, growth expectations aren’t just yours—they’re shared.
Comparing The Two Paths: What You Gain And What You Risk
When you bootstrap, you own your success story. Financial control is squarely in your hands. You decide where to spend and when to grow. This often means a scrappy, resourceful culture—but also, sometimes, slower innovation.
Raising capital shifts this dynamic. Growth can happen quickly, but for that, you give up equity. Investors might want a say in how the business runs. That means more goals to hit, more updates to provide, and less freedom to change course.
In terms of scalability, outside funding can help you reach a bigger audience in less time. If your market moves fast, waiting might not be an option. But with that comes dependence on investor satisfaction, sometimes pushing you into high-risk decisions.
Any investor-backed company is hitching its future, partly, to outside interests. There’s always a chance you don’t see eye to eye. In bootstrapped companies, missteps matter, but the consequences are more personal and, often, a little less public.
Stories From Both Sides: Real Business Examples
Let’s take Mailchimp. They started in 2001 as a bootstrapped company. The founders used early profits to keep the business running and could do things differently than their venture-backed rivals. Their focus on keeping customers happy, even if it slowed them down, built long-term trust. They ended up selling to Intuit for $12 billion. Not bad for a business that never took outside cash.
Now, think about Airbnb. They famously started by renting out their own apartment, using cash from selling breakfast cereal boxes for seed money. But they realized that to become a global platform, they’d need more than scrappiness. With major backing from venture firms, they scaled worldwide, survived early setbacks, and are now worth tens of billions as a public company.
Mailchimp shows what slow and steady growth can do. Airbnb shows that sometimes, access to outside cash is the difference between a great idea and a dominant company.
There are takeaways. Bootstrapping needs patience and grit. Raising capital demands high growth and a willingness to give up some control. Different industries, markets, and personality types push founders toward different routes.
Figuring Out What Fits: How To Decide
Picking between bootstrapping and raising capital depends on a few things that only you can answer. How big is your potential market? How quickly do you need to move? What resources do you personally have access to?
If your business idea could work as a side hustle, or if your customers can fund early growth, bootstrapping might be the better bet. Want to disrupt an industry where speed matters more than anything? Maybe outside capital is a better fit.
It’s also worth thinking about long-term goals. Do you want a lifestyle business that pays your bills? Or are you swinging for the fences, aiming to build something that could go public or sell for big money?
Blending both is possible, too. Some founders bootstrap until they find clear traction, then raise outside money to keep growing. Others start with outside funds but structure things so they can buy their shares back over time.
And, you’re not alone in this. There are communities, forums, and resources like Marathit where founders share their funding journeys and offer advice.
Common Myths and Misunderstandings
You might have heard that all “real startups” raise millions of dollars—or that bootstrapping is just for small-time players. That’s just not true. Plenty of businesses have succeeded wildly without backing from big investors, and some venture-funded companies stay small or even fold.
Another myth: If you take investment, you’re guaranteed growth and success. Money helps, but only if you know how to use it. Sometimes, too much cash can even mask deeper problems, like building something nobody wants.
Some founders think investors only care about numbers, but that’s not always the case. Many look for passion, team dynamics, or market potential instead.
And just because you start one way, doesn’t mean you’re stuck. Pivoting from bootstrapped to funded, or vice versa, happens more often than people realize.
Final Thoughts: Picking Your Path, Checking Your Progress
There’s no one right answer for everyone. Some businesses thrive on every dollar scrimped and saved, while others need an infusion of cash just to get out of the gate.
You’ll want to take a close look at your own goals, the market you’re in, and what you need to build the business you want. If you’re leaning toward outside capital, prepare for more accountability and faster pace. If you’re thinking bootstrapping, be ready to play the long game with less cash—but maybe more peace of mind.
It’s about figuring out what success looks like for you—not just in the short term, but for the years ahead. Most founders learn as they go, adjust as things change, and remember that there’s a thousand ways to get where you want to go. There’s no deadline for choosing, and the best path might be the one you shape as you learn.
Now, as new platforms and funding models pop up, the line between these choices is more flexible than ever. Maybe that’s the real takeaway: Whatever route you start with, be open to changing course if your business or goals demand it.