Bootstrapping versus Venture Capital

This is very much a function of the type of product or service you're building, the market you're targeting, how quickly you expect (or want) the company to grow, and its total upside potential.  It's also a function of the type of company *you* want to build.  Since there are so many variables here, it's very hard to generalize.  If you're starting a company that is more of a "lifestyle" company, e.g., one that probably won't see a "hockey-stick" growth curve into millions in the first few years, then you're pretty-much stuck with bootstrapping, simply because you will have a difficult time finding an investor who will invest in a company with minimal upside for him/her, plus investors like to see clear exits.  But, sometimes there's nothing wrong with bootstrapping...you get to keep most of the company (instead of giving much of it away to investors) and you get to run it the way you want to (instead of being run by the investors via the Board).  On the other hand, if your product/service is one that must get out on the market fast to "catch that wave," or its a land-grab, then going the slow-growth route will most likely kill the company.

Entrepreneurs: Turning the screws down on investors will just lead to a very long round.

It's tough to raise money these days, especially if you don't want to mortgage your house or run a big credit card debt.  So, you need to provide terms that are in the norm.  When you're raising your first (or second) angel round, typically you (and your attorney) will provide/present a term sheet for the round.  It's tempting for first-time entrepreneurs to "turn the screws down" on the terms.  By this, I mean making the terms favorable to the founders to the point that they just aren't attractive to the investor anymore.  If the going rate for interest on a convertible debt is 8%, then make it 8%, not 5%.  If the going rate for a bridge discount is 30% make it 30%, not 10%, etc.  If your company is successful, the difference in these terms won't matter.  Giving up a bit here will close your round faster, get you the money you need, and everyone will win.  You don't know what the terms should be?  Your attorney will know.  If he doesn't, then get a different attorney.  Ask him what terms you need to get your round closed by a certain date.  Then get the term sheet out, get the round closed, and get on with running your company.

Investors invest in people, not products or services

You've probably heard this before:  Bet on the jockey, not the horse.  Another one:  I'd rather invest in an "A" team with a "B" product than the other way around.  It's the A team that can make a questionable product/service successful, and if that's not possible, it's the A team that will know it can't be and kill it (or morph it).  Why is this?  The A team knows how to assess it.  And, more importantly, the A team has the contacts database to assist him/her in assessing the market potential, and getting it into the market.

These days, you need to be capital-efficient

Back in the 90's, VCs would put millions of dollars in a high-tech start-up, and patiently wait several years for the start-up to build its hardware product (software is a different story).  If the product was successful, everyone won, and many did.  It's not that way anymore for most investments.  Unless you truly have a blockbuster hardware product, these days your start-up needs to be capital-efficient:  less money has to go farther, and the point in time when your start-up either gets springboarded to the next level or gets its plug pulled is shorter.  Keep that in mind when developing your funding strategy and product roll-out strategy.