The Entrepreneur Insiders network is an online community where the most thoughtful and influential people in America’s startup scene contribute answers to timely questions about entrepreneurship and careers. Today’s answer to the question, “Is it a good idea to build a startup without investors?” is written by Pini Yakuel, CEO of Optimove.
My decision to bootstrap took shape on the trip down in the elevator after my first meeting with venture capitalists. I was the cofounder and CEO of a budding startup in the marketing technology space, and getting funding was the thing to do. We needed the cash, but we also needed recognition, and what better way to get both than in the form of VC investment?
The meeting went well the chemistry was palpable; the offer was generous; and the VCs asked all the right questions. But my gut told me that taking their money and using it to send my toddler of a company straight to college would be the wrong thing to do for everyone involved. I didn’t even know the term at the time, but that was the moment I decided to “bootstrap” to grow my startup without any external capital.
This wasn’t a trivial decision, and I knew that it spelled great uncertainty, lower salaries and a continuing sense of obscurity. But looking back, it was one of the best decisions I’ve made. It allowed me to maintain full control of the company, the product and the business. I didn’t need to rush decisions or dance to someone else’s tune just yet. Our business grew organically, with the first clients bringing in the revenue for further updates to the company, enabling us to grow into a 100-employee company with 200 clients and offices in three continents. Here’s how we did it, and what I’d recommend other entrepreneurs in a similar situation think through:
Think about where the funds will come from if not from the VCs. First and foremost, our decision meant that we needed to generate revenue. Our strategy was consulting: while we were building our product, we offered customer-centric companies consulting services our product was to eventually provide. As consultants, we used our budding algorithm and a lot of manual work to model brands’ customer databases to the same extent (albeit at a much more simplistic level). The cash that came in allowed us to continue development until we could launch our first version. Only when we had an MVP did we pivot from a consultancy-based business to a SaaS model.
Prepare your company to not have VC injections for at least the next two years. We also had to run a lean and mean operation. We coined the term “agile financing:” we worked our budget month to month, creating a cash buffer between revenues and expenses, and invested only in the most painful bottlenecks. We had to make sound strategic decisions, and to develop only areas that brought in value.
Hire for the company you are right now, not where you want to be. We also had to take great care of our HR strategy. We made sure that every new employee was multi-talented, able to carry her weight in product, sales, marketing and data science. As the company grew we could afford more specialization, but the first few years demanded that every new person on the team owned a varied and unique skill set.
Have faith. This may sound cheesy, but most of all, we needed stamina, confidence and faith. This is the crux of the matter: keeping up the faith is a daily struggle, and it’s not right for everyone.
Six months ago, after six years of bootstrapping, we took $20 million in growth funds. Now that Optimove is a full-fledged company with a set character, I knew that the external capital won’t change it into something I won’t recognize, but may very well propel it forward with stronger thrust. It will change our velocity, not our nature. We could go forward without the funding, but I appreciate the benefits the money will bring to the company today: market validation, faster growth, increased scale, greater flexibility, assurance for a rainy day, and the strategic guidance that IGP’s well-seasoned, tech-savvy partners offer us. But I cannot forget that it is bootstrapping allowed us to reach this stage. For me, as founder and CEO, it provided time to grow. For the team, it was a source of pride and motivation. We pulled our weight. We made it on our own. Now, the sky is the limit.