Outside Money Is Plan Z

If you are running a [service business], avoid outside funding.

I’m always intrigued when I meet a startup founder and they are so proud of the Series XX funding they’ve just received. When they explain their business I think, “why did you need to raise money for this?”. In most cases they are already charging customers but yet can’t sustain themselves or they can’t sustain the employee growth they want/think they need.

David and Jason provide many convincing reasons to avoid taking on outside funding but for me it’s primarily about independence. It is usually much better to take a slower approach and grow organically and prove to yourself and your customers that you can be a sustainable business without the crutches of outside funding.

There are many businesses that do require outside funding. I currently work for a business that wouldn’t exist without outside funding. But it had many different requirements, capital expenses, and a LONG path to commercialization that wasn’t viable as a self funded business.

Be smart about what you are getting your business into. Look 5-10 years down the road to make sure your business will end up where you want it.

Note: This is part of a series of posts inspired by re-reading Rework, by DHH and Jason Fried.

Nate Bird @nate