There have been many discussions comparing bootstrapping versus fundraising when building a startup. This post isn’t about those kinds of discussions. Instead, I want to highlight key points rarely discussed when choosing one path over the other, particularly fundraising.

Proponents of bootstrapping will often say that it’s better to bootstrap because it gives you more control over your company, you can’t be fired or pressured to grow quickly and to succeed, you don’t need to scale as big.

On the other hand, proponents of fundraising often say it helps you de-risk your startup, allows you to scale a team faster, and gives you more resources to build quickly.

Neither of these are wrong. Both sides have valid arguments, and it depends on the founders and their goals. However, what isn’t talked about as much are some key tradeoffs you lose if your goal is motivated on some level by a financial outcome.

Here are some things you might not know about that fundamentally changes the game beyond your startup goals:

  1. Raising money can rapidly increase the value of your startup. Two startups competing in the same market with similar growth and traction can have a wildly different valuation. The funded startup can easily be worth 10x to 50x more than the bootstrapped startup. You may not think this matters, but it does if your shares have value and your startup allows for liquidity (which, today, more and more private startups allow). This means that, from the perspective of founders getting liquidity and making a case for hiring talent, this can be a big deal.

  2. Along the same lines, it isn’t uncommon for startup founders to take money off the table around their Series B or Series C, sometimes millions of dollars, to incentivize founders to swing for the fences. In such situations, the founders can still walk away with a lot of money even if the startup fails.

  3. The level of networking and connections you can access isn’t the same. Even if you run a tech startup and live in Silicon Valley, the difference between a bootstrapped founder and a funded founder can be night and day. There is rarely any shame in startup failure, and most founders will get back up and try again, but even if they don’t, many fail upwards due to the connections they’ve built. I’ve met many ex-founders who have become execs at other companies based on their connections. If not for their connections, most would not qualify to apply for the role they have. This is a big deal that often gets overlooked.

  4. When a startup fails, some founders will try to find a soft landing for their company and try to sell. This is more likely to happen if you’re a venture-backed startup. The likelihood of a failing bootstrapped startup getting acquired is significantly lower. While this may not create any financial wins, it’s another form of failing upwards that should be considered.

  5. The ability to have access to future deal flow to invest in other startups. Despite their startups failing, I’ve met many founders who have been able to invest in other startups due to the connections they’ve built. Some investors and funds allow prior founders they funded to participate in investing in future portfolio companies. A personal friend of mine whose startup failed was able to invest in over 120+ other startups within 5 years, most of which are rising stars in their own right, simply being associated with the investors that invested in his startup. If even a fraction of these startups succeed, the returns will be massive, far outweighing the outcome of his own startup.

  6. Founders of funded startups can also land in roles and positions that sometimes are otherwise not open to other founders as easily, such as being an Entrepreneur-in-Residence (EIR) at a top-tier VC firm or startup studio, doing creative work or deals, or running some events, that lead to opportunities that otherwise are usually closed off to bootstrapped founders.

Most people think raising money is simply about money and valuation, which investors join your board, etc. But clearly, a lot of outsized value comes with raising money (from the right investors) that can be a game changer.

On the flip side, bootstrapping has considerable benefits besides having complete control over your company and not being pressured to grow quickly. You get plugged into a different community of founders and networking that generally funded founders tend to ignore or not be a part of. You can also focus on building a more atypical company structure like many indie hackers who now straddle the line of creating multiple income streams and an online following that typical startup founders don’t. Ideas that are “unfundable” but can be wildly successful are an evergreen playing field.

Consider these points the next time you think about bootstrapping versus fundraising.