Vasiliy Ivanov is the Founder and CEO of KeepSolid. KeepSolid builds modern security and productivity solutions for more than 21M users.
You don’t need to look too deeply at startup culture to spot a key pattern: An idea is born, and an embryo of a company is formed. The company eventually gets sold once an attractive price is offered. Or, it doesn’t get sold, and it dies.
Even if founders are laser-focused on growing their startup into a mature business, the pursuit of investors becomes one of their major activities and, for better or worse, a key indicator of the company’s success and value.
In my company, accepting outside investment has never been in our DNA. However, I’m far from calling investor funding a universal evil. Investment can be powerful fuel to speed up a business’s growth, but only if it comes at the right time and with clear purposes.
Initially, my opposition to outside investment was shaped by the belief that investors would take a share of my company and impose their vision on me. I also didn’t feel that the timing was right. When we were offered funding, we were growing quickly and didn’t need outside support.
My eureka moment came when a series of technical and managerial missteps created a crisis that shrank the company by half. Since we had no outside investors, we were forced to be creative and look for ways to survive. I learned a lot about our organizational culture and internal processes, reshaped our approach to production and developed the company philosophy that has been guiding us ever since. If I would have had the means to throw money at those problems, they would likely have persisted and become worse. But the absence of “idle money” made me grow as a manager and entrepreneur.
Why forgo investors?
When speaking of the advantages of building a company without investors, I can mention these as the major benefits:
You become more creative. When you can’t buy a runway to success, you start looking for other ways to achieve it. I know that our direct competitors are large companies with substantial funding. Since we can’t compete with them in the areas where money matters, we try to find an overlooked niche, develop more attractive or elaborate products, and generally be more innovative and flexible in business.
You grow with your company. Running a business without external funding means that you can’t hire several hundred employees overnight or launch a completely new product line. Your growth is slower, but it’s steadier. Throughout this journey, you always remain in control of your company, and your skills typically fit the size of your business.
You are independent. This is my personal ethical dilemma: When you accept someone’s money, by extension you’re making a commitment not to waste it. Although I understand that investors accept risk when they fund a new company, I feel more responsible and bound by the promise of success. Freedom from investors means freedom to call the shots yourself and true independence.
Why accept outside investment?
This isn’t to say that outside investment can’t help your company. A few benefits of working with investors include:
You can speed up your development. Obtaining outside funding can enable you to not only accelerate the process of building your business, but also hire a stellar team and explore ideas that would otherwise be postponed.
You can hire managers you trust and delegate your responsibilities to experts. This is the scourge of small business: To run a company effectively, small-business owners often wear the hat of the CEO, CTO, operations manager and, to a certain extent, even the accountant and headhunter.
You have a greater tolerance for mistakes. Especially when it comes to hiring team members, you don’t need to stake everything on a single person. You can try different candidates without the pain of losing your own money.
All of this can give you more freedom and more peace of mind regarding your business. Most importantly, attracting investment is a must for sectors that need intensive capital expenditure. It’s hard to build a new factory, for example, without external financing.
The beauty of entrepreneurship is that you can choose to run a business in a way that suits you best. You could be a freelance developer forever or build a mature company. You could attract investment and then sell your startup to the highest bidder, or you could bootstrap the entire business by yourself.
If you’re torn on which route to take, answer these questions:
1. Do you want to build a large company, or are you interested in the format of a family-run business? In the case of the latter, you might want to maintain control over your entire business. Bear in mind that it is also much harder to find investments for smaller, family-owned businesses.
2. Do you want to scale the company quickly, or do you have the time to allow it to grow at a more regular rate? If you are aiming to scale it, you might need to accept outside investment.
3. Do you want to remain the sole owner of the business, or are you going to be content with a smaller share? Of course, investors do not always ask for more than half of your business, but with each round, your equity can get more diluted.
4. Will you be content with how decisions will be made? The more people who have ownership in the company, the harder the decision-making process can be. There are two conflicting approaches to decide between here: trying to play it safe to guarantee a return on the investment and taking risks or implementing long-term projects.
In conclusion, while outside investment can help you make some big strides forward, it’s not always the right move for a business. I believe foregoing outside funding can actually jump-start your ability to think outside the box and harness the invisible — yet powerful — culture of your company.