Startups 101: How and why a green retailer chose to bootstrap instead of accepting venture capital
If you’re an entrepreneur running a startup and begin to find some success, you will likely face a crossroads:
- Should I bootstrap, funding the business myself with personal savings and/or ongoing revenue?
- Should I procure funding and give away ownership interests to a venture capitalist or private equity firm?
To help you make this decision, we interviewed Brian Fricano, Founder/CEO, Sustainable Supply. He is an entrepreneur who has weighed the pros and cons of each option and made this decision for his own startup.
Brian and his wife launched Sustainable Supply seven years ago as a business with a social mission. “The core of what we were trying to do was sell products for commercial buildings that save water and save energy,” Brian said.
Profitable from day one
They started the business without any outside funding, according to Brian.
“Bootstrapping has forced us to be profitable from day one,” Brian said.
Without a cushion of outside funding, the company had to be creative, and launched with a “drop shipping” model, in which products are shipped directly to customers after they purchase and not to a retailer’s warehouse.
“We signed up dozens of suppliers that were willing to drop ship on our behalf, so we were able to become a virtual distributor, never taking possession of inventory,” he said.
Not only did the drop shipping model allow Sustainable Supply to start operations without the need to invest in inventory, it also tied into its social mission by reducing the carbon footprint and pollution generated from shipping products twice (first to the retailer, and then to the customer).
Success brings offers of capital
Sustainable Supply was successful, and was named the fifth-fastest growing retailer on the Inc. 500 list of America’s fastest-growing companies. This attracted the attention of venture capitalists interested in investing in high-growth startups.
This decision has worked for his company for two reasons. First, Brian would have diluted his ownership if he accepted the investment.
“Our growth after that has [grown four times over] since we made the Inc. 500 list. Had we brought on investors, we would have given away too much too early in the process,” Brian said.
Sticking to its social mission
In addition, his company has a social mission. Its tagline is “Build. Work. Green.” While there are a few exceptions, most venture capitalists are focused on growth and profitability, and less concerned with a social mission.
“Each venture capitalist has its own specialty, not a lot are specialized in sustainability…there’s not a lot out there that have a social component to them,” Brian said.
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Watch more interviews from the MarketingSherpa Media Center at IRCE 2016