Lifestyle businesses vs funded startups?


1

What are some pros and cons to each? There are a few lifestyle businesses that seem to have grown huge without any funding. WikiHow is one such example.

Why would you choose one over the other?

Funding Business Startups Lifestyle

asked Mar 6 '14 at 18:00
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Jonathan Thompson
20 points

1 Answer


3

It depends on your personal preferences and situation. Here are the high-level pros and cons of each.

Lifestyle Business (aka Bootstrapped Business)

PROS

  • Complete control over all aspects of the business.
  • Complete ownership of all the profits.

CONS

  • Access to significant amounts of outside capital may be limited.
  • Growth, relative to investor-backed businesses, may be slower.
  • Access to your own personal network only.

Funded Startup (aka Investor-Backed Business)

PROS

  • Access to significant amounts of outside capital.
  • Ability to grow and scale quickly without worrying about covering expenses.
  • Access to your investors' networks and advice.

CONS

  • Major decisions require approval from investors.
  • Shared ownership with investors.
  • Investors ultimately seek an ROI, which may mean an exit of some kind.

By the way, it's possible to grow a bootstrapped business enough to get the attention of investors, then become an investor-backed business. Ryan Carson's Treehouse is perhaps the most well-known example of a company doing that.

Basically, you are trading ownership and control for cash and, hopefully, faster growth. It's like a bank loan, but now the "bank" is involved in your business strategy, has a shared interest in fast growth, but will eventually seek an exit.

If you don't need any outside capital and can grow quickly yourself, however, then you don't need any investors. Paradoxically, that's the best position to be in when trying to raise funding from investors too.

answered Mar 6 '14 at 23:53
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Mike Lee
1,356 points

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