One of the most popular questions I get from entrepreneurs is “do I bootstrap or raise capital?”

Just yesterday, I was talking to an entrepreneur and that question came up. Their SaaS business is making progress with a handful of paying customers. Existing customers are asking for new features. Market conditions are growing more dynamic. Yet, product/market fit isn’t there. Authentic demand isn’t clear either. The product leans nice-to-have right now with the potential to be a must-have. Remember: team, stream, and a not a meme.

My recommendation: don’t raise money. Continue to bootstrap the business. Work towards product/market fit and then a repeatable customer acquisition process (see The Four Stages of a B2B Startup).

Do raise money when the business is working. When customers love the product and it’s clear there’s a big opportunity, investors will invest on better terms and at better valuations. Too many entrepreneurs raise money before the startup’s fundamentals are sound and that results in heartache.

Sell investors on facts, not dreams. Raise money on your own terms. If the startup isn’t ready, keep bootstrapping and grinding it out.

What else? What are some more thoughts on bootstrapping or raising capital?