Yes, You Can Start a Business Without Raising Money.
Most small businesses launch without raising a penny. And they have good reasons for doing so.
Years ago, I went to visit an American friend of mine who lived with her French husband in a modest apartment in Paris. While she bustled around the kitchen putting dinner together, her husband and I talked business out on the patio.
He owned a small import business that imported gloves from Switzerland and resold them to a handful of high-end retail stores. Since I’m fascinated by small business, I grilled him with questions: How did he find his suppliers? What kinds of margins were there? What were the most popular categories? And then, trying to be helpful, I steered the conversation toward some tactics I thought he might consider. “Have you tried broadening the product line?” I asked. “What about sourcing products from other less-expensive countries? Have you considered expanding into wholesale?”
But the more animated I became, pointing out one way after another that I thought he could improve his business, the less I seemed to be getting through. In fact, judging by the expression on his face, there appeared to be a total lack of understanding. Thinking that this must be the language barrier, I slowed down, simplified the vocabulary, and took another run at it.
Finally, shaking his head and laughing, he held up both hands. “Stop, stop,” he said. “Why would I want to do any of the things you are suggesting?”
“I have a great life now. I have an apartment in a nice neighborhood here in Paris. We have a small cottage in the south of France. I take 5 weeks off every summer. I take long weekends during the year. Why would I want to make my life more complicated?”
I didn’t have a good answer then, and I’ve continued to think about that story ever since, because it’s a great reminder that not everyone has the same get-big-fast mentality that seems to permeate so much of American business culture.
Despite the relentless drumbeat coming from shows like Shark Tank or Elevator Pitch that drive home the message that the only way to launch a company is to raise money, hire a big team, and “go big or go home,” that doesn’t have to be the way.
Although venture money can be a great way to start and accelerate a business, there are strings attached. When a venture capitalist invests in you, they may be aligned with your mission to change the world, but they have an additional objective: whether you change the world or not, they still expect to get their money back – ideally multiplied by some very large number. And as a venture backed founder, when you accept that money, you accept that responsibility to do everything you can to make that happen.
That might mean pursuing an exit or a liquidity event, even if you personally don’t feel it’s the right time. It means growing the company as fast as possible, even if you are enjoying running it at its current scale. It means not cashing in the chips you earn from small successful wins, but instead pushing those chips back into the middle and going all in.
But it doesn’t need to be that way. The great majority of businesses started each year are not venture-backed tech; they are small businesses started with personal savings, or small business loans. They are designed not to generate amazing wealth for the founders and their early investors, they are meant to provide an income and a reasonable lifestyle for the business owners and their employees.
If you’re struggling to decide what form your new business should take, then I think you will enjoy episode 26 of the That Will Never Work podcast. This week, my guest is trying to decide whether to take on the funding that could accelerate his current business to the next level, but would also commit him and his company to a faster track that may be impossible to get off of. It’s a fascinating discussion and the place we come out just might surprise you.
Entrepreneurship is a field that requires making countless decisions, but none are quite so momentous – or quite as non-reversible – as the decision of whether to launch a venture funded rocket ship, or keep your aspirations, as well as your lifestyle, a little closer to earth. The good news is that there is no right or wrong answer – there is just the answer that is best for you.
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Podcast Episode 72
October 25, 2022 • 38 min