In this SaaS District video, Akeel Jabber walks SaaS founders through a three‑question framework to decide whether to raise venture‑capital (VC) funding or continue bootstrapping. He first explains that VC‑backed companies are expected to achieve rapid, "hockey‑stick" growth that can justify an exit, and that founders who are not prepared for that pace should likely stay bootstrapped. The second question concerns equity ownership: taking VC money typically dilutes founders to 30‑45% of the company after a lead investor, co‑investors, and an option pool take their shares, so founders must decide if they are willing to give up that control. The third and most emphasized question is about autonomy and workload; VC‑backed founders are expected to work full‑time, scale quickly, and meet investor milestones, whereas bootstrapped founders can set their own pace and maintain a lifestyle business. Akeel concludes that both paths have merit, encourages founders to reflect on these three dimensions, and invites viewers to share their own experiences in the comments.
Chapters
One question I get often from SaaS founders who come to me who are looking for financing is, Akeel, I'm growing my company. I've built my company to a certain point to where it is today. Should I raise VC capital? Should I go out there and raise funds or should I continue to bootstrap my company? So welcome back to another episode and video of SaaS District. Glad to have you guys back. On today's episode, what I'm going to talk about is ask yourself these 3 questions to really try and decide and help you decide if VC funding is right for you. So when most people think about financing their startup, the first thing they think about is raising VC capital because that's the popular way to raise your business and start and grow your business. Now, most people think about bootstrap. They don't think, you know, it's as exciting and a good way to grow a business. But to be honest, I think it's over 80 or 90% of bootstrap— of companies that are out there are completely bootstrapped. And there's actually nothing wrong with doing that. It's actually a good way to build a business as well. And there's 3 questions that I want to cover today that'll help you decide, should I raise VC capital? Or should I continue bootstrapping my company? All right, so the first thing I want to talk about is hockey stick growth. So one, one question you want to ask is, do I aim to have hockey stick growth? So a hockey stick, you can imagine it, this is what it looks like. You know, you're going from here, as you grow, this is what they want to see that'll eventually lead to an exit. And that's exactly what a VC is going to expect from you. And that's exactly how the revenue trends. So what they expect for you is that your revenue is going to grow linearly, linearly or exponentially over time, that's going to lead to an exit. And if a VC— if you're going to be talking to a VC and approaching them, they're going to expect you to be able to grow, take their money, invest it into your company, and grow explosively fast. Now, if you're a company that's not ready to grow at breakneck speed of your company, then don't look at, you know, I would, I would exclude looking at VC as an option for financing your company. So that's the first thing. The second thing I want to talk about Is the amount of retention or how much ownership do you want to retain? How much equity do you want to keep in your company? Okay. If you're going to look for a VC company, you're going to get diluted, right? Your equity shares. So if you're the only founder or if you're, let's say, 2 co-founders who are 50/50, by the time you start selling shares of your company and raising capital, you're, you're, the amount of equity you're going to hold is going to be a lot lower than when you first started. Okay. So that's going to change the ownership equation. Things get a little bit complicated. Typically, some examples I'll mention, a lead VC who's going to come in for most of the amount, they're going to want by the time it's done, you know, 20 to 25% of it. They're going to own 20 to 25% of the business. A co-investor might come in, they'll own another 20 to 25% of the business. And then there's usually like an option pool for your team investors or other key advisors on the team, which is another 10 to maybe 20%. And then finally, owners are usually left with, you know, if you're lucky, 30 to 45% of the business. Okay. So just think about, are you willing to sacrifice that equity and ownership or do you want full control, 100% ownership of your company as you grow it? Okay. And that's a personal decision. There's no right or wrong answer. The third question I want to answer when you're trying to consider VC versus bootstrap, I think to be honest, this is probably the most important part. Is do you want full autonomy on the amount of— on the work you're doing? And do I get to work as much or as little as I like? A lot of people who build bootstrap companies, they, they look at it as lifestyle businesses. Okay. If you're building a VC-backed company, there is no lifestyle behind it. A VC is going to expect you to be working long hours, hard and full-time commitment with that money that they put in. They want to scale fast. They want that exit. They want you to raise that next round of financing. And they expect that you're going to be putting a lot of time and effort into building it as fast and quickly as possible. So that doesn't give you the autonomy to work as much as you want on what you want, when you want, and on the products you feel like building for that day or doing nothing. You can't just say, hey, you know what, I'm not going to do anything and continue to take a salary with the VC because they're going to expect updates, they're going to expect to see growth, and they're going to expect to see what you're doing with your time to continue to grow the business forward. Now it's not saying that, you know, any startup, if you start a startup, a bootstrap company, you're not going to work hard. That's a given. Okay? Every business you start, it's going to be hard to build. However, what are the point I'm trying to make here is you have the decision. Okay? You can make that decision. If you're a bootstrap company, you can decide how fast you want to scale your business. And that's really up to you. Is that a personal decision? Do you want to be tied down and be fully hardworking? Hard until you grow and hit that hockey stick growth in order to sacrifice some of your autonomy. Again, those are some things to think about. Both options are great. I love bootstrap companies. I love VC-backed companies, but the ones who are able to make it and continue to grow at a nice pace bootstrap, I find the founders, you know, are able to maintain a lifestyle much better than if they're VC-backed. All right guys, hope you enjoyed this video. Let me know below in the comments. What have you done? Have you, have you raised external VC or are you a bootstrap SaaS founder? What do you prefer and what route are you leaning towards? All right, thanks for joining SaaS District, guys, and I'll see you guys on the next video.
