A friend—I’ll call him Allen—spent years bootstrapping his real estate enterprise software company. After a long struggle to get to $1 million in sales, his business recently surged to $10 million, and revenue is now growing 100% year on year.
Prior to that inflection point, Allen had never raised venture capital. I had always perceived him to be a bootstrapper by choice, assuming that he’d never pitched anyone. He wanted to do it his way, I thought. He was scrappy. He owned his whole company. He was a benevolent dictator, revered by his team. His company had always been profitable.
A $300,000 loan from a family friend was all the startup capital Allen had ever needed. As I scrambled to raise $128 million from investors to sell pants on the internet, I’d always thought that Allen thought I was an idiot. (Which, by the way, he still might.)
Allen recently admitted to me that he did pitch VCs early on, and got turned down. His recent success has changed everything, as VCs became much more interested. Still, Allen wrestled with the decision—should he fundraise or not? And if so, from who?
What I’ve learned from Allen is that whether you are a bootstrapper or a venture-backed CEO isn’t a question of permanent identity. It can be fluid. Companies evolve in terms of what they need and where they’re going.
It’s a little cheeky, but bootstrapping enables you to be an absolute monarch. Raising money is more like becoming the president. You’ve got a lot of power, but you can’t get anything done without Congress, a.k.a. your investors. And after a lot of dilution, they can fire you.
Another thing to consider: Disproportionate personal wealth is often created when you raise your first funds only after your company is already worth hundreds of millions, as Allen eventually did, rather than raising at a single-digit-million seed valuation early on.
Do you want to own more of less, or less of more?
Once you’ve decided to raise, the question is from who. But the better way to frame the question is: Who should I not raise from?
The answer is: most people. Most investors suck, including some at brand-name VC firms. They are learning on the job, they’ve never built anything, and yet they think they’re awesome.
The best way to find the ones that are actually awesome? Answer two questions.
Have they backed at least two companies you admire? Backing one can be luck; two is a trend. This means they’ve had success and know what it looks like—and they’re likely to keep doing it.
Do founders love working with them? Seek out those two founders to ask them what their experience was like. Then find a third founder the investor backed whose company failed. Did they handle that with grace?
You can rule out most everyone with these two questions. The ones you can’t rule out? Do anything to get them involved.
Allen ended up raising from someone who cleared both bars. There are days when he doesn’t love the loss of full control, but overall he seems like a happy camper. He also has $30 million from selling secondary shares, and he’s still the CEO of a company that might go public.
If you raise from the right people, you really can have it all. And if not, there’s a lot of honor in doing it your way. Just remember: Whatever you own owns you back.
Andy Dunn, the founding CEO of Bonobos and Pie, offers advice on leading teams, building things, and surviving the startup life. Do you have a question for Andy? Send it to askandy@fortune.com.
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