I’d like to start with a disclaimer: 2Shoes has taken investment but not the type that I consider ‘real’ investment or what I am showing the cons for in this blog. We have taken orders of magnitude less money than many startups and from 3 family members, making our commitments far less critical than those that are beholden to angel groups or VCs. There is no pile of cash for salaries or office space. Just enough to make the product and our hard work does the rest.
Now, with that out of the way, I’d like to talk about why you shouldn’t go after that big pile of cash with the strings attached. It sounds very nice at first- you wouldn’t have to worry about paying the bills each month and focus on making, and selling, your product. What could be wrong with that? Well, first of all, this investment comes with the expectation that you will increase the investor's money by orders of magnitude AND that they will be paid back first before you ever see a dime from that big aquisition that you dream of. There are many horror stories on the internet about entrepreneurs taking huge investment, hitting it big and selling their company, but being even more broke than when they started off due to all the money paying their investors back and them getting zilch. Even though you won’t worry about paying for groceries, the stress of a needed high ROI may take its toll on you and your team.
We love our 3 family investors. Not only is the capital we took extremely small and easily repaid, but the pressure to succeed is far more supportive than stressful. They want us to succeed because we are family and if they benefit along the way, then that’s even better. Another great thing about taking only enough money to build the product is that it forces you to move fast and sell sell sell. This is one thing that our team has done very well. From the beginning, Elliot and I released functions that were embarrassingly untested but got feedback as quickly as we could and worked towards getting our first customers. We put development costs on credit cards and sold our hearts out. When we finally decided to ask for money to build our V.1, we had already had a paying customer and big users. We just needed a bit more cash to get this next version out.
The biggest pro for not taking on huge capital is that it forces you to stay lean and mean. Nobody is getting lazy when there is no money in the bank and the lack of resources makes you choose the right decisions and pivot away from bad ones. I have personally seen several startups, that have taken capital, be in development for several years and barely try to sell their product. I understand that development times make it difficult to release products, but there is a huge amount of validation in selling your product to someone, no matter what stage you are in. Finally, not taking serious investment means that you get to keep what you kill and be rewarded by your long hours pursuing your dream.