In reality, very few founders just raise straight away. 99% of founders spend a significant amount of time working on their business before they see the first dollar from the investor.

Operating business with capital constraints most of the time actually leads to way worse decisions. You start working with people who are less qualified because either they are volunteers or they are the only people you can afford. You start taking worse terms with customers because you need this money to survive the next few months or make the next payroll. You start taking credit card debt just to give you a few months in the hope of closing the client. You put your house as collateral to and pay social/mental costs if things don't work out.

So please please please if you have the opportunity to raise money on standard terms, just do it, unless you have rich uncle/family or wealthy yourself.

Also, people need to stop treating money in a startup financing transaction as a more honorable side of the deal. When you buy tomatoes in a store, you don't go to the store owner and be like "Yo, I gave you money, respect". Startup investors give money for shares in a business. One part of the deal is exactly as valuable as another.

Please don’t follow their advice.

> The alternative is to forgo raising money and creating a sustainable business from the beginning, growing linearly with the number of people that give you money for your product.

This works only for insanely wealthy founders or trivially simple to implement businesses (and even then you’re going to need to be way richer than average). One of the great things about the rise in startups, accelerators, and VCs is that starting companies has become a career option for far more of the population.

The rest of the argument just degenerates from there:

No skin in the game: try telling that to a founder who’s taken a 50–80% pay cut and probably started off working for free to get their company funded, but who owns big chunk of the equity and can pay themselves properly if they get to product market fit and hit a growth curve.

Ruthless execution, faster path to growth etc. Nonsense! I’ve come across plenty of small startups or individual founders that carried on far too long after they should have admitted failure because of the sunk cost fallacy. Team keeps taking sacrifices - cut all costs, less pay, work for equity, etc. But while you’re small enough you can do this nearly indefinitely. Taking funding forces you to aim for something bigger and you’re either going to win, close down, pivot, or get acquired. Sure you can keep raising while there’s a probability of a big enough success at the end but the size of the potential and burden of evidence goes up with every new round and every increased valuation.

Even if the assumption that founders put zero money of their own is true (as others have pointed out it is not, in vast majority of the cases) founders have enormous opportunity, emotional cost, lost salary and the financial hardship.

Assuming that it doesn't require money to build, which is dubious in many cases, but alright.

> Not only that, but because you don’t have the safety net of a pool of money, you are forced to find the fastest path to sustainable growth.

Sustainable growth? Or just the fastest path to growth at any non-monetary cost so you can make the next payroll? Sure it might be cash sustainable growth but could be unsustainable in other ways such as making ever higher promises to keep customers buying more, allowing all sorts of unscrupulous purchases of user data, or shipping software without any modicum of security.

> You now have no choice but to be ruthlessly focused on the things that impact your bottom line (i.e. pay the bills)

Or you end up cutting corners and compromising on the product just to get some cash in the door. A lot of ethical red lines become maybes when the bank account declines. I have a lot of friends in the startup space and they have amazing stories of suddenly cash short companies burning up their reputation just to get the next sale.

Crises don't lead to clearer decision making. A constant threat doesn't lead to clearer decision making. It leads to shorter-term thinking. https://journals.sagepub.com/doi/10.1177/0146167299025001006

Would you do a better job for your company if they kept you one paycheck away from eviction? Or would you play politics, become a sycophant, hide errors you made, and be heavily focused on just making it to the next week no matter the cost?

Most startups won't know a priori which of these categories they belong to -- that's the job of VC. So I'm not sure if "don't raise money" is always the right advice.

To start with, it does not feel right to have to raise money or give away equity in order to build the first MVP to look for product market fit.

Founding team should have all the skillsets required to launch the first version of the product (Tech + Marketing minimum). Tech founder who is able to code the product and has the know how to keep it running for as cheap as possible, and another founder who knows how to bring the product to market.

Iterate from there, and if lucky eventually slowly have a sustainable business. Along the journey, not having VC money trains the founders to make difficult choices and learn things the hard way. Ie. Founding team will do as much as they can before hiring someone else, optimize cost of operations rather than throwing money easily at problems, etc.

Founders who are in it for the long game and want to build a sustainable business, will find not raising money most attractive.

This author possibly lost "contact with the earth". Especially early on, most people will not join and work for free (or on the sole promise of equity down the road). Not all startups are simple CRUD apps, many require significant R&D or marketing investment upfront.

But the are some severe limitations:

1) You may not scale as fast as you'd want to

2) You may be competing against businesses that ARE funded, and can undercut you

3) The setup period may be very long. If you're gonna fund it all yourself, that may take year and year of saving money. This if obviously a huge problem if you've discovered a niche with lots of potential RIGHT NOW.

The biggest difference between a typical startup business, vs "classic" type of business, is the speed and scale.

(With that said, I don't think the race to bottom by funding/VC arms-race is a good thing.)

The cons of raising VC money? You are forced to answer to someone else to some extent. You become vulnerable to complacency and largesse for the reasons stated in the article. You put some distance between yourself and customers early, which can slow down your quest for product-market fit. You lose a piece of the equity pie.

The pros of raising VC money? A good investor can give you market knowledge you would have to learn the hard way otherwise. A war chest can give you a head start over other early-stage competitors (or establish you as legitimate among existing ones). You can take on problems that require large up-front investments. You can hire people to help you out without having to worry about your ability to pay them.

Personally? I found the tradeoff to be worth it and raised money for my current company. We worked for about 8 months without paying ourselves, and then started paying ourselves half our market rates once we had some supplementary cash in the bank. We hired a few stellar employees who knew how to do the things we needed to do but couldn’t, and now I think we’re in a much better spot than we would have been had we not raised.

But obviously it depends on the situation - just because it’s worked for us doesn’t mean it will for others. Happy to answer further questions about our founder rationale for anyone who’s interested.

If a VC sees a good business with great execution that doesn’t need their money, they’ll rush out immediately to find a competitor that does. If an investor is sitting on a good business, they want to keep it quiet and hold their shares privately. If it’s a toxic money pit, push it onto the LPs and then get them to help you pump and raise.

The cost of big-money capital is so cheap now that it inverts the incentive for business discipline. The more you lose, the more you raise, the bigger the valuation.

That said, I don’t think you want to swing the pendulum the other way and everyone should bootstrap everything. Hiring good people takes money. I think you should raise the amount of money you actually need and no more. Scarcity drives the hard decisions.

Capital deployed effectively is effective that it can be distracting is one of the risks. Also, in growth phase, usually growth and getting to mass-market is more important than sustainability. If you're the new Twitter, you want to get to 500M users or whatever as quickly as you can.

For most, its a harder path without. Growing fast with organic income leaves little room for risks (strategic/operational/extrinsic) and competitors with capital can outspend you.

Delivering a world beating service/product on a shoestring budget while spending on growth is even harder. Kudos to those that did this (Browserstack, Atlassian etc).

Sure, by raising money you’re going to grow your business more easily, but you’ve also compromised your ownership of it.

Obviously, if all you think about is cashing out after the company’s IPO, raising money makes sense. Especially, if you don’t have a sustainable business in the first place, and you’re losing money.

That made us improve every action and work harder on every situation so we can have a better connection with what we are building.

So, money is something that we always think that could help, but sometimes you can only find secrets without it.

Raise or not to raise. That's the question.