Virtually all successful startups have taken venture capital and the majority of startups who strictly bootstrap either fail or never make it big. But an equally big mistake is seeking outside investments too soon.
It's cheaper than ever to launch a business, and bootstrapping for a longer length of time is more viable now. But budding entrepreneurs may not know that their own funds can be supplemented with money than doesn't come with the many strings of a venture capital firm's.
"What most people don’t realize is that there are plenty of tools out there to start your own company with just a few thousand dollars," said Jon Oringer, who founded Shutterstock Images in 2003. "If you can figure out how to avoid an angel or venture round, you will have much more control in the long run."
According to Oringer, benefits of bootstrapping include a helpful focus on profitability, greater control of your own company over the long term, and an increased awareness of when it may be time to reiterate or pivot.
Here are four alternative funding options in Canada for the savvy bootstrapper.
1. The Telus $100,000 Small Business Challenge
The $100,000 Small Business Challenge powered by TELUS and the Globe and Mail awards 69 companies. The grand prize winner snags—you guessed it—a cool hundred thousand dollars. 68 other finalists receive tiered prizing, which includes funding, tech, and marketing prizing. All of them receive a profile in the Globe and Mail. That level of national media exposure is something many small businesses simply can’t afford during those early days.
The Small Business Challenge is an annual opportunity for Canada's brightest entrepreneurs to showcase their unique business ideas and share their biggest challenges. Last year more than 3,300 small businesses from across Canada submitted entries.
2. Business Innovation Access Program
Through the Business Innovation Access Program, companies are eligible to receive up to $50,000 per innovation project.
Eligibility requires a for-profit corporation operating in Canada with 500 or fewer full-time equivalent employees. BIAP is a Government of Canada pilot program, announced in the 2013 Budget that provides $20 million in funding to enterprises. Projects for BIAP include short-term projects for which a business service or technical assistance would clearly demonstrate the potential to contribute to quicker commercialization of products or academic research.
3. Youth Employment Program
Through the Youth Employment Program, businesses are eligible to receive up to $30,000 per graduate to cover the cost of a six-to-12-month internship.
The Youth Employment Strategy is the Government of Canada's commitment to help young Canadians (aged 15 to 30) obtain career information, develop skills, find good jobs and stay employed. Small and medium-sized enterprises will receive a financial contribution geared towards supporting a portion of the salary costs of a post-secondary graduate, who will work on technical opportunities within the small and medium-sized enterprise and on non-technical but technology related projects
These platforms offer opportunities to generate early revenue, build a customer base before a product is released, and validate businesses. Crowdfunding can also be used to sell a new product even if a company already has an existing base. Several Canadian companies have generated dollars in the six and even seven figures in just a couple of months through crowdfunding, including Mass Fidelity ($1.3 million USD) and DreamQii ($1.2 million USD).
5. Equity Crowdfunding
In select provinces in Canada, companies can sell equity to regular consumers through crowdfunding.
"Unlike regular crowdfunding (e.g. Kickstarter, Indiegogo) where you receive perks or rewards for the money you give, equity crowdfunding actually allows people to own a piece of the businesses they help finance," explains Taran Aujla.
It's a newer concept and not as thoroughly proven as regular crowdfunding but certainly worth investigating.
So there you have it—bootstrapping from your own pockets doesn’t have to be your only option. Best of all, you can combine any of these options together to bolster your business even further. Good luck!