Using own money to save a company: when is it still an investment and when is it just burning cash?
AM Survivor #3
Just as we never truly know when the real end of a business is approaching (a moment founders often overlook), the line between investing in a company and irreversibly burning cash in an attempt to save it is often barely visible.
When it comes to young businesses, less than two years old, this seems fairly obvious — either you manage to make money, or you don’t.
But for companies that have been operating for seven to ten years and suddenly face serious financial problems, the issue of the founder personally financing the business with their own private funds becomes much more complex.
It’s hard to know when to stop when you’ve poured so much energy and personal commitment into something.
Every founder fights until the very end. First, they are left with nothing, and soon after, they’re drowning in debt.
In those toughest moments, it feels like saving the company at all costs is an act of responsibility. That it’s courage. That it’s the right thing to do. But in reality, it’s often the road to self-destruction.
Why do we reach for our own money?
Why is it that business owners so often reach for their own personal savings to save a sinking company? From the outside, it seems simple — if the company isn’t making money and there’s no real prospect of recovery, you should close it down.
That’s the theory.
In practice, it’s entirely different. A company isn’t just a legal entity, a collection of invoices, contracts, and business cards. It’s primarily a personal story. It’s a piece of life that — whether we like it or not — we treat like our own child.
And you don’t abandon a child just because it’s sick.
True, good founders also feel enormous responsibility toward their employees. It’s not just about themselves — it’s about the people who built the company alongside them, about their families, about their obligations.
There’s hope. That damned hope that maybe it will still work out. That it’s temporary. That just around the corner, there’s that one project that will change everything.
And then there’s fear. The fear of losing your reputation, of being judged by others, of what the industry, your friends, and your family will say. Suddenly, we’re not just fighting for the company — we’re fighting for our own name.
When is it courage?
Sometimes, using personal funds to save a company is justified. There are situations where such a step is reasonable and necessary. When the crisis is truly temporary, when there is a clear, realistic turnaround plan, when the problems stem from external circumstances, not from fundamental flaws in the business model.
There are moments when investing your own money allows you to survive a tough period and get back on track later.
But real courage in business is about taking such steps based on facts, not emotions. It’s about being aware of the risk and carefully managing how much you can sacrifice without destroying your private life in the process.
The problem starts when we lose control. When personal funds become the last lifeline not because it’s wise, but because we don’t know how to let go.
When desperation replaces courage.
When is it a mistake?
A week ago, I shared the story of my failing business. Looking back now, I can clearly see that what once felt heroic was simply a mistake. I was trying to keep the company alive despite the complete lack of any real foundation for improvement.
It only took a few months to spiral from a business that was more or less balanced to one bleeding cash uncontrollably, ultimately leading to the total depletion of funds.
It was pure madness. Frenzy. We were churning out product line after product line.
Each of them, individually, was interesting, but the sheer number and diversity of ideas made it impossible to bring even one of them to market — let alone make it a success.
Just look at this…
Each product had some kind of strategic outline behind it. But if the strategy didn’t work in the first few weeks after launch, we immediately chased another idea and another version. Over and over again.
Each project, each implementation, cost money. Each month compounded the losses.
In reality, those products and strategies were nothing more than a wish list, not grounded in any hard data. Each amount I invested was like a bandage on an open wound that refused to heal.
How to make the right decision?
If I could give my past self some advice today, I would say: start with hard data.
Not hope, not emotions.
Numbers.
A ruthless financial analysis without sugarcoating and without self-deception.
Then — ask someone from the outside. Someone who isn’t emotionally involved in the company. An advisor, an accountant, a mentor. Someone who will look at it with a cold eye. It’s also worth writing out a clear plan: what will change if I add this money?
When should I pull out?
Where is the line I will not cross?
And most importantly — you have to be honest with yourself. Sometimes continuing the fight isn’t a sign of strength, but of the inability to let go.
Sometimes the hardest, but most mature decision is to step off the ship.