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Why I Wouldn’t Bet the Farm

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How many times have you heard an entrepreneurial success story where the founder took huge risks and won big?  It usually goes like this:  they took out a home equity loan, maxed out their credit cards, and pitched violently forward into the ditch of debt only to be saved at the last minute by a business miracle.  It seems like that’s the way folks become successful.

I was at Boston ENET a while back and I heard a story just like this.  The speaker talked about all that debt she had taken on, and all the cost-cutting she had done personally to squeak by.  She offered as an aside the tidbit that she had taken a ZipCar to get to ENET that night because her own car had been repossessed.

I think I’ve heard about similar “all in” bets from Elon Musk for Tesla, and Marla Beck for bluemercury.

Some folks don’t quite subscribe to this approach, and I’m wondering whether that will forever consign them to the realm of the mediocre.  The alternative looks like this: work a corporate job earning more than you need and save a big cash cushion.  Buy one of the zillions of decent businesses out there with established models and relatively straightforward ways to make money from your cushion.  Now you’re in some measure financially independent, forever, and you haven’t bet the farm.  If you’re going to start a totally new business entity, you can continue this cautious approach and sprinkle in some professional services or other “easy & early” products to keep the lights on while you spool up.

That’s called bootstrapping, and I can’t say it makes for the sexiest story.  But then, it’s not very sexy to close up shop, declare personal bankruptcy, and go back to your old job, either.