Why Founders Should Raise Only a Single Round of Capital

Most founders shouldn’t raise capital, and those that do should probably raise one round of financing and then build a profitable business.

That’s what we did at RevBoss. We raised one round of financing, $1.3 million, and we’ve been bootstrapped ever since.

I’m a solo founder, so I viewed the capital raise basically as a co-founder and used that cash to buy Runway and to hire a product and engineering team.

We’ve had our ups and downs for sure, but this has been the right strategy for me. And I’ve learned a lot along the way, including these three things.

The single round of financing approach is not any more or less hard than the go for broke venture capital model. It’s just different.

For one, it creates a cash constraint, which is good. It forces focus in prioritization and decision-making.

When you don’t have unlimited venture capital, it means you can only do a few things really well and you can only afford to hire a small team, which is generally a good approach.

When you’re taking this approach, you don’t have any choice but to have extreme financial discipline, which frankly has been kind of nice for us over the past 12 months with all the turmoil in the venture market.

Number two, the FOMO is real.

There have definitely been times where I have been extremely jealous of my friends that run businesses that are venture backed.

I know it isn’t any easier and that those people are dealing with a whole different set of problems that I don’t have, but there’s been plenty of times where I sure wish I had an extra $500,000 on the balance sheet to have a little bit more breathing room or to make an extra hire or just to make things a little bit easier.

But then I think about number three, it’s less stressful when you get over the hump.

It feels like sometimes there’s less upside in my approach, one round of financing and then bootstrap, but that also means there’s less stress too.

And that upside can be misleading, especially in a topsy-turvy market like we’re in right now.

All those additional rounds of financing shrink your ownership and massively raise the bar that you have to clear for everyone to be happy with the process.

Meanwhile, because we’ve raised less capital, I have a much lower bar to clear to make everybody happy, my investors, my team, and my wife.

And lastly, because we haven’t strapped on a ton of capital at RevBoss, I’m the largest shareholder in the business, which means I have a lot of control and a lot of accountability. And that gives me peace of mind and confidence in the way that I run the business.

And all that helps me take a long review.

And all of that helps me take the long view and weather all the ups and downs that come with building a business.