What startup founder doesn’t dream of rapid and sustainable growth? In the short-term rental
(STR) sector especially, the race to scale at lightning speed often leads founders to view outside
funding as a kind of rocket fuel — an easy means to headline-grabbing growth and a constant
pipeline of new customers.

But the allure of being the brains behind the next big thing risks pushing even the savviest of
entrepreneurs into hasty decision-making. How many are giving up control and equity too soon in
the name of growth at all costs, instead of focusing on perfecting their core offering and actually
becoming profitable?

For bright-eyed and bushy-tailed entrepreneurs in the STR market, securing the right kind of
funding can mean the difference between genuinely sustainable growth and a rushed, ultimately
unprofitable expansion. And with the funding landscape only getting tougher and tighter, it’s more important than ever to make the right choices about when — and when not — to take on funding.

So, how do you decide which path is right for you and when to make the leap? Let’s shed some
light based on my observations.

Bootstrapping the beginnings

In the earliest stages of your startup, innovation is your superpower. You’re building something
from nothing, which means your priority isn’t scaling — it’s product-market fit and getting the right team in place. At this stage, external investors are rarely necessary beyond seed funding, and in
many cases, they can even become a distraction, bringing in the extra layer of investor demands.

Bootstrapping allows you to keep operations lean, make quick pivots and focus on
experimentation without the pressure of outside influence. This is where innovation thrives as you can afford to take risks without fielding questions from a board of directors. While resource may be limited, bootstrapping builds resilience and creativity — qualities that you’ll definitely need later. And, as a bonus, if you reach profitability in this stage, you keep more of it for yourself.

Considering crowdfunding

Once you’ve proven your concept and started building a loyal user base, crowdfunding can be a
powerful tool to propel your startup to the next stage. Apart from injecting much-needed cash
into your business, crowdfunding has the added benefit of creating a community of brand advocates with an extra incentive to recommend your product to their friends and colleagues.
These invested supporters are also ideal testers, helping you refine your offering.

But keep in mind that crowdfunding isn’t a free lunch. Securing committed investors demands
significant upfront effort, from strong marketing to clear incentives. Further down the line, you will actually need to deliver on your promises. Treat this phase as your first taste of being accountable
to an external audience — albeit with less pressure than big investors.

Weighing the benefits of venture capital

When you’re ready to scale rapidly, venture funding becomes an increasingly tantalizing option.
Whether it’s expanding into new markets, investing in tech development or bringing on new team
members to handle extra work, large injections of capital are often essential to achieving growth
potential. At this stage, funding isn’t just about staying competitive — it’s about outpacing
competitors and staking your claim in the market.

But venture capitalists don’t hand out money for free. In exchange, you’ll need to give up equity and accept
increased pressure to deliver rapid returns. This often means more complex decision-making
processes and potential compromises on long-term goals. Before approaching venture capitalists, ensure your
finances are in order and you have a clear, actionable plan to deploy the capital effectively. Without a solid scaling plan or strong financial foundation, venture funding can backfire, pushing
toward unsustainable growth and unattainable targets.

Most importantly, know where you stand once you secure funding: how will you maintain your
vision and leadership where it matters most and where can you compromise?

Private equity’s dampening effect on startups

As any industry grows and professionalizes, private equity (PE) inevitably makes an appearance.
PE firms are becoming increasingly prominent in the STR sector, offering promises of profitability and operational expertise on a scale larger than this relatively young industry has seen. But there’s
a catch: PE firms tend to prioritize short-term revenues over long-term sustainability, often stifling the innovation that got this sector to where it is today.

Think of PE firms as house flippers. They buy a business in decent shape, make super
changes to boost curb appeal, and sell quickly to maximize profits. But if your long-term vision is just two or three years, how can you expect success five or ten years down the road?

The main goal of PE is rapid profitability — and that brings us to the second issue. The quickest way to increase profits is often through cost-cutting, which typically means layoffs. With
reduced team, lower customer confidence, and a short-sighted business plan, innovation becomes nearly impossible.

That’s not to say all PE firms are bad. Some bring valuable insights to growing businesses while respecting the founders’ and teams’ expertise. But in the STR sector, at least for now, PE hasn’t
had the transformative impact many had hoped for.

The leadership balancing act

Whether or not you bring in outside investors, founders must maintain their vision and stay strong
as leaders. For those working with PE or venture capital firms, this means managing stakeholders effectively. For others, it may mean choosing to retain full ownership and control. Either way, strong
leadership is essential.

It’s a balancing act. Founders need to embrace the operational discipline that external funding
requires while staying mission-driven and fostering innovation when it makes sense. Clear
communication, a well-defined vision, and unwavering confidence in your expertise are your
tools for ensuring outside pressures don’t derail your company’s future.

For STR startups, funding isn’t one-size-fits-all. From bootstrapping to venture capital, only you and your executive team can decide the best time to bring in different sources of capital.

And as for private equity? Proceed with caution. While there are benefits, it’s crucial to partner with firms that share your vision and keep your customers at the heart of decision-making.

Ultimately, there’s no single “right” path to scaling a company. The best decisions come from
listening to all perspectives, learning from peers and staying true to your vision. By navigating
funding decisions with confidence and foresight, you can build a business that is not just fast-growing but built to last.