You have an idea for a business that you know could revolutionize your industry. (Well, maybe not revolutionize, but it’s a pretty nifty idea.) Like many entrepreneurs, though, you might not have the funds necessary to make your idea take flight. That’s where you’ll need to decide whether to crowdfund or bootstrap your remote company.
In the Entrepreneur article, “How to Decide Whether to Crowdfund or Bootstrap Your Business,” the explanations—as well as the pros and cons—of each type of fundraising is explained.
So if you’re planning on creating a remote company and deciding whether to crowdfund or bootstrap, here’s what you need to know:
Bootstrapping Your Remote Business
Typically thought of as the traditional way to launch a burgeoning business, bootstrapping is building your business with little or no capital. Almost all of the work is done via sweat equity and without investors.
Pros of Bootstrapping
- You have more time. Unlike crowdfunding, if you’re planning to bootstrap your business, you can take your time. It gives you more of an opportunity to finesse your product or service and allows you to grow your business at your pace, which in turn can help you build a successful remote team.
- Unlimited job posts
- Low, flat membership fee
- Access top-level remote advice
- Unlimited resume searches
- Reach the right candidates
- And so much more!
- You have total control. If you bootstrap, you’re essentially the one funding your business. As such, you have total say over what, when, and how you create your company. You don’t have to cave in to investors who want you to tweak your business to fit their ideas.
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Cons of Bootstrapping
- It takes time. Having to do almost all of the fundraising yourself can be time consuming. Plus, if you go this more traditional route, then the time you spend trying to raise money for your project can take away from the time needed to grow your business.
Crowdfunding Your Remote Business
If you’re on any one of the top social media channels, you’ve most likely seen a pitch (or, in some cases, a plea) for help with crowdfunding.
Crowdfunding means that you’ll get smaller amounts of capital from various investors (think $5 to $10 per person). While it might seem like small potatoes, if you get a few hundred people to invest in your crowdfund, you’ll get a cool amount of capital quickly.
Pros of Crowdfunding
- It’s easy. There are many sites that allow people to crowdfund (think Kickstarter, Indiegogo, and RocketHub) quickly and easily. These sites can help manage your funds for you, and you’ll have fast access to the money with little waiting time.
- It’s fast. Crowdfunding isn’t designed to take months or years. Instead, crowdfunding is a fast-and-furious world where campaigns are launched quickly and end just as quickly—most within 90 days or less.
Cons of Crowdfunding
- You might have stakeholders. Yes, that person who contributed $2.99 to your Kickstarter is now a shareholder in your company, depending on the terms you set on your crowdfunding page. For example, if you request donation crowdfunding, people donate what they can—at no cost to you. Equity crowdfunding means that in exchange for their donation, each donor becomes an investor in the company, gaining a piece of it. And with peer-to-peer crowdfunding, investors expect their money back once your company is good to go.
- You might have to pay some of the money back. If you use crowdfunding sites, you’ll sign a contract and be expected to fork over a percentage of profits back to the site. And in a scenario where every penny counts, having to pay back some of your profits can be painful.
So if you’re looking to launch a remote company, it’s a good idea to assess your needs before deciding if you want to bootstrap or crowdfund your business. If you’re looking to take your time, have complete control over your business, and don’t need capital immediately, then bootstrapping would offer the most benefits to you.
On the other hand, if you’re looking to launch your company, like, yesterday, don’t mind having to pay back a small percentage of funds, are OK with the idea of having investors, and have the social media savvy to solicit donations, then crowdfunding would be a good option for you.
Readers, did you decide to crowdfund or bootstrap your business? Are you happy with the decision you made and why? Let us know in the comments below!
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