While bootstrapping avoids monetary debt, it forces you to accumulate management, technical, and data debt because you can't afford top talent or premier tools. This non-financial debt can hinder growth more severely than a loan.
Unlike bootstrapping where you only serve end-users, raising capital introduces investors as a second customer. Their demands for high-growth and specific metrics can often conflict with the needs of your primary customers, creating significant operational tension.
VCs need massive 1000x returns from a few portfolio companies to offset many total losses, pressuring founders to pursue high-risk strategies. For a founder, whose life is their one company, this pressure can lead to failure when a more moderate, sustainable path might have succeeded.
Investing is effective for growing existing capital but is too slow for initial wealth creation. Citing Warren Buffett is misleading due to his extreme longevity and early start. This path is better for preserving wealth than for achieving "mega money" in a typical career timeframe.
Fund managers achieve extreme leverage by combining limited partner capital (OPM) with debt. A small personal investment can control a massive asset pool, meaning even modest market returns on the total portfolio can generate exponential returns for the general partner.
Entrepreneurs often believe capital is the scarce resource. The reality is a global surplus of capital exists, all searching for strong returns. The true scarcity lies in finding and presenting well-structured, de-risked investment opportunities. If you have a great deal, money will follow.
While diversification is preached for managing risk, the world's most successful investors build wealth through concentration. They make a few large bets in areas where they have a distinct advantage or "alpha," rather than spreading their capital thinly across the market.