In an interesting article on Forbes, Martin Zwilling delved into his top 10 reasons for a start-up to skip outside investors, highlighting the fact that research is showing the truth behind the myth that most entrepreneurs naturally seek outside investors.
In reality, there are some very important factors as to why 80 percent of new Entrepreneurs surveyed in the Kauffman Foundation and LegalZoom’s 2012 Startup Environment Index choose to rather fund themselves through their personal capabilities.
Few investors will happily bankroll a project or business without wanting some say over their investment. More likely than not, investors will want to be involved in and consulted on every big decision – if not the daily activities of the company as well.
This doesn’t sit well with most entrepreneurs, as most decide to start their own business to eliminate having to answer to a boss above them.
When you know that your own money is on the line, you can’t help but work harder to make the company into a success. As comforting as a safety net like a big investor is, when it’s not there, then you inherently know that with every move, that it’s make or break.
The type of person who becomes an entrepreneur craves the adrenaline rush from putting their all in creating their legacy.
When there isn’t a ready supply of funds, it becomes that much more important to approach each business relationship from a partnership point of view. This is especially true with suppliers. Not only will entrepreneurs on limited capital put in extra effort to work with vendors offering the best price for quality, but can also strike up a partnership that can bring down the cost further for a stake in the profits.
This type of win-win relationship motivates each party to put in the effort to make the transaction a success for themselves. Another important factor is how both sides are on equal terms in the agreement, unlike with an investor.
Deciding to start your own business is a huge decision. It’s also a huge risk, and the main thing minimising that risk is your commitment to making sure the venture succeeds.
There are few ways of showing your commitment more powerful than putting your personal welfare on the line, which is effectively what an entrepreneur does when they put their personal funds up as the start-up capital. A seemingly scary step to take in abstract, but for the entrepreneur who believed in their vision enough to drop everything and start a business from scratch, it becomes a natural commitment to make.
The company is the entrepreneur’s creation, theirs to nurture in every way that’s needed in order to be a success – it’s the most natural thing in the world to give it everything.