Startup 101: Bootstrapping vs. Raising Angel Money
I talk to entrepreneurs all the time. Most live in Atlanta, some live in other places up and down the East Coast. Probably the topic of discussion that is most contentious is raising money from angel investors.
The most important thing I’ve learned from these discussions is that as an entrepreneur living outside the heart of startup land in San Francisco, you have to think differently about raising money. You must be real with yourself on whether or not should you should even be looking for angel investors.
Years ago I read a great post on this topic that has forever stuck with me. It’s written by David Cohen, the founder of one of the most prolific startup accelerator’s Techstars. It’s from way back in 2006 and the basic points made are still relevant today regarding the topic of bootstrapping vs. raising angel money.
The bottom line straight from David Cohen is that:
If you’re going to go and ask any kind of professional (non-emotional) investor (angel or VC) to open up his checkbook, you had better be talking about building at least a $20M business. Fact.
Remember, that number is from 2006. So in today’s terms you have to up it, (for the sake of argument) to a $100M business.
If your business is not going to hit that number in let’s say 2 to 5 years after you get your angel investment, then you are a great candidate for the “bootstrappers” club.
There are some other rants and nuances that provide more context on David’s blog. Please go check it out here.