Funded Companies are Fragile Companies
There are basically two theories about funding a start-up. One is to bootstrap the company; the other is to pour on the cash. Bootstrapping is always attractive because if the company
becomes viable, there is no dilution for the founder and he or she will enjoy a great deal of freedom. Atari started that way. We launched the company with $250 and didn’t raise a dime until the business was generating about $40 million in sales. Yes, I went without a paycheck for long periods of time, and I almost lost the company one summer. But we survived and prospered and found out ways to save money on everything. This created a very robust business, because we were simply more efficient than any of our competitors. For us, bootstrapping worked like a charm.
The other common start-up approach is to raise money early and often. This allows a company to rise quickly up a very steep ramp, achieving large market share much sooner than is typical. Founders often end with very small percentage of ownership. As long as the company grows quite large, of course, this is not so bad. Read full story:
