Bootstrapping, Crowdfunding, or Venture Capital: What’s the Right Strategy?

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Reality television shows like Shark Tank have given entrepreneurs more motivation than ever to start their own business. But snagging a wealthy “shark” to scale your business is not the reality for most, and the competition for VC funding is stiff as investors grow more cautious about where they’re willing to put their money. No matter which way you slice the startup, entrepreneur or enterprise pie, finding investors is no easy feat. But correctly combining it with the right enterprise payments strategy can potentially make fundraising easier in order to scale your business.

Regardless of which funding path you take to start a business, fast growth and faster cash flow will be critical components to either attracting investors or self-funding the business. Companies must have a way to accelerate cash flow, and a scalable enterprise payment solution is a critical component to getting more customers and attracting investors.

The secret to growing any company comes with understanding what investment route is best suited for your business model. So let’s start by examining three common concepts that companies use today: Bootstrap, Crowdfunding and Venture Capital. Oftentimes, businesses rely on a combination of two or three of those options. Before determining what strategy is best to help scale your business, or which process aligns with your enterprise payments model, we’ve broken down the elements of each of those investment strategies.

Bootstrapping Your Business Plan From the Ground Up

This is the most basic business plan for any company that is starting with very little capital or outside investments. This is typically an individual who starts a company with their own money or with money earned from growing another business.

As for the benefits of a bootstrap growth model? The owner has full control over all the decisions and does not have to answer to any investors. That means, for example, when onboarding a solution to manage your enterprise payments to flow money into your business, the decision is solely on the owner.

On the flip side, this also means all the financial risk is on that owner or group of owners to manage the entire business. For most startups, relying on a bootstrap model will not provide enough capital to scale your business plans.

What’s necessary in the case of this model is for a company to rely on partners across the business ecosystem to help them grow their business. On the payments processing side, this means working with a partner like Payline in order to onboard solutions that help a business drive more revenue, and speed up payments and cash flow.

For a startup that’s got a strong customer base to draw from, having a solution provider with the right technology and tools can help you grow your business without having to rely on outside investors to make connections. Because payments integration is a key part of scaling any business, having the right partner to onboard your enterprise payments strategy can help your business grow with little capital.

Fast Break: Payline Makes It Easy to Choose Your Own Adventure.

Building Your Business the Crowdfunded Way

With VC funds harder to come by in the ever-competitive startup world, many companies are looking to test their products and services the best way anyone knows how: asking for small amounts of money from a large group of people.

Sometimes these are complete strangers that stumble across the concept online; other times, this business model could be a number of close friends who want to help support a business idea. What makes this concept desirable is the fact that there is little to no risk on the owners if the business doesn’t scale. The small investors who gave money toward the project don’t have a lot at stake financially, so the owners don’t have to worry about significant backlash from them if the company didn’t take off.

The investors in these types of business plans tend to be basic people who like investing in a new product or business that’s just getting its feet wet. Because crowdfunding is a heavily regulated industry, it restricts an individual from giving too much of an investment — keeping the risk low for everyone involved.

From a funding perspective, sites like Kickstarter have made the concept of crowdfunding easy, by processing payments for novice investors on an international scale. Not only does the entrepreneur not have to worry about how the funds are collected, they don’t have to worry about how to get those funds distributed to make their project possible. The third-party website platform, powered by enterprise payment processing, have made that experience happen seamlessly.

Crowdfunding also gives people an early buy-in to a product that has the potential to get popular, and therefore could be sold for a much higher price once it hits the market. It also gives investors the feeling of being part of something before it becomes popular. For example, a Kickstarter fund for the Pebble smartwatch brought in more than $30 million in funding between two different campaigns between 2012 and 2015.

The Venture Capital Strategy to Scaling Your Business

The VC funding strategy has been getting the most attention following the Silicon Valley tech boom that’s quickly expanded to other fast-growing metropolitan regions in the U.S. Because VC funds are investment funds that manage money from investors wanting equity stakes in startups, it’s often the quickest way possible to get large amounts of money from very wealthy investors.

Of course, going big always comes with more risk. The risk here is that by opening up your company to more investors, you are giving up some of the decision-making power. Because those investors are usually providing large amounts of capital, they also expect large equity stakes. That means, right at the start of the business, you may be giving up a significant part of your company.

On the flip side, having a savvy investor who knows how to grow a business may give you the necessary industry connections to scale your business in a way that makes giving away that equity stake worth while. Because this type of investment is focused on early-stage investments, what the money from that equity stake also gives small companies and entrepreneurs is the ability to raise more funding and grow a business faster. From a scalability perspective, there is a better bet that a small venture can turn the benefits from the capital influx into a booming business — given the right investor.

Beyond having the right investor in a VC funds strategy, going this route may also open up your business to connections with other companies that they have investments in. That means, for example, if you are a business needing help processing payments to sell your product/service, you may find an investor who also works with a company that specializes in payments.

Scale Your Business with Enterprise Payments Solutions

Because growing a business isn’t just about the products and services you sell, any entrepreneur should be aware of the other aspects that help a business grow quickly. Perhaps that’s having the right payment enablement and software or service provider to integrate new payment methods into your current model. Or, perhaps it’s providing you with a technology-enabled partner that can help you grow your business and customer base.

At the end of the day, deciding what business investment strategy is best for your company’s growth management, it comes down to just a few questions:

  • Will this strategy help scale your business?
  • Do these investors have the right partnerships to help continue growing your business?
  • Do these investors have access to the right technology partners and software providers to power the type of enterprise payments needed to scale your services and solutions?

Once you have evaluated the differences of the three investment strategies listed above and asked yourself these few basic questions, then your business will be in a better position to strategically manage its growth strategy. From there, you can determine how and what route is best to onboard an enterprise payments plan to help supplement that growth in a way that’s sure to happen once you’ve secured an investment plan.

Discover the Possibilities

Carlton van Putten is the Senior Vice President of Revenue for Payline and has 25 years of experience in technology marketing and product development for SaaS and Internet business models.

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