Walt Disney, the famed animator and entertainment entrepreneur, once said, “If you can dream it, you can do it.” However, simply having a business idea is not enough; you must also figure out how to get it off the ground, which is where many entrepreneurs make their first and worst blunders by failing to correctly assess whether they should bootstrap or seek out funding for their startup.

What is bootstrapping?

A bootstrapped startup is one that is funded entirely by the founder’s personal funds rather than through outside financing. This means the founders have complete control over their business and are not required to report to any investors. Other advantages to bootstrapping your business includes:

You are less likely to overspend:  It is all too easy to get caught up in the excitement of a new venture and begin spending money like crazy. However, when you are the one footing the bill, you are more likely to be conscious of where your money is going and less inclined to make impulsive purchases.

Bootstrapping gives you freedom: You have considerably more flexibility in running your business when you are not reliant on outside funding, and you can be more daring and experimental with your products and services without having to worry about what other investors might think.

Bootstrapping can be cheaper in the long run: If you can get your business up and running without outside investment, you will most likely wind up spending less money in the long term. This is because you will not have to repay any investors and will not have to give up any equity in your firm.

However, there are a few potential drawbacks of bootstrapping a business:

You may not be able to provide enough capital: It may be difficult to raise enough funds for your business if you are bootstrapping it. This can hinder your capacity to expand your firm or capitalize on new opportunities.

You may need to work longer hours: When bootstrapping a business, you may have to work more hours. This can be challenging if you have a family or other obligations.

You may need to make sacrifices: When bootstrapping your business, you may have to make sacrifices in order to save money, as it may take longer to expand due to the limited amount of money you have on hand.

What is a funded startup?

A funded startup is one that has obtained funding from investors, such as angel investors, venture capitalists, or others. In other words, a startup is “funded” when it receives funds from a third party that will be used to assist it in growing and scaling its operations.

Startup funding comes with numerous advantages, including:

You get more capital to grow your business: When you have more funds, you can hire more employees, buy more inventory, and spend in marketing and other growth strategies.

You have access to expert advice and mentorship: Most investors are also seasoned entrepreneurs who can provide valuable advice and mentorship to help your business thrive.

You get a ready-built network of contacts: Investors often have a wide network of contacts to whom they may introduce you, which can help your business in many ways.

There are, of course, some downsides to startup funding as well, such as:

You have to give up equity in your company: In exchange for their investment, investors may acquire a stake your company.

You have to answer to someone else: Investors may demand a say in how your business is operated, which can be challenging for entrepreneurs accustomed to total control.

You might not get the full amount you want: It can be difficult to raise the necessary funding from investors, and it may take months or even years to do so. During this period, your business may not be able to expand quickly.

The bottom line: is bootstrapping or funding better?

At the end of the day, both bootstrapping and funding have their own advantages. There is no one size fits all answer to this question. It all depends on which fits your situation and goals better.

From a financial standpoint, having funding gives you more scalability; therefore, choose funding if your product is unique and you have a competitive edge. Moreover, unique products require huge funds to develop a market around them.

When it comes to bootstrapping, scaling your business may be more difficult, but while your business may grow a little slower, you have the advantage of controlling the whole business.