In today's startup culture, no sooner than you go to market, most entrepreneurs turn their attention almost exclusively to fundraising. It's obvious why--capital can dictate whether or how quickly you scale and there's no telling how long it will take to raise the required funds. But the decision to fundraise is a complicated one, in that it pulls time and focus away from your business, often at the exact moment that attention is most needed.
That's why in starting my business, PerformLine, I did it without the traditional venture capital raise. Instead, I found a way to let the business fund our growth. While I see the merit in raising capital and quickly trying to move to scale, what I have found is there is another way. Over the last 7 years, we have built the go-to automated technology platform for marketing compliance, reaching 50 percent year over year growth and sustainable profitability--all on the recurring revenues of the business.
Contrary to what you may have heard, building a scalable tech platform can be done without significant outside capital.
1. Keep a Capital-Efficient Mindset
From our earliest days, we watched cash very closely, spending only when it was needed it most. We prioritized sales of our MVP over extensive research and development, and cut back on all non-essentials. Even when we were in a more flexible cash position, I maintained the same efficient mindset. For example, Instead of purchasing passes to conferences I wanted to attend, I bartered my services, offering to speak in exchange for free admission. For the first few years our sales team would couch surf at friends' houses when traveling to pitch a prospect instead of staying at hotels. There are times, even in the early days, when spending is necessary, and some luxuries do count. We always try and treat our clients and partners to nice dinners and events.
2. Sell Product Early, Even If It's Not Your Full Vision
When you are bringing a product to market, most entrepreneurs strive for perfection. But expediting product arrival to market means that you can start generating revenue now. Keep in mind that the product doesn't have to be representative of your complete vision for your business. When we first launched PerformMatch, our SaaS platform that allows clients to see the full scope of their compliance issues, it was a very different version of what it is today. We've evolved in scope and scale as regulators became increasingly more vigilant and the number of channels for reaching consumers has exploded. In addition, we were able to ask our customers for their feedback on the product and show them that we kept their thoughts in mind when refining and launching the next versions of the product. Building a scalable technology business is not a sprint to the finish line. Being able to connect with customers to gain feedback while tracking market industry trends can not only help inform your vision for additional versions of the product, but for the business overall.
3. Pace Product Development
When building out a product, think about the Minimum Viable Product (aka MVP) and how this early version can maximize the amount of validated learning you can take in about potential customers. Look at each new version of your product as one step forward in the MVP strategy. If the MVP is right you can accelerate development. If it requires a pivot or change, it's not as expensive to do so because you didn't overbuild. When we were building our PerformMatch Workflow product, we were able to listen to the early demands of our customers, especially the need for a workflow tool to centralize all compliance and remediation activities across internal departments, and with external partners. By the time we launched the 3.0 version this past July, we saw the impact of these incremental improvements on overall usage and customer satisfaction rates.
4. Make Smart Hires
In many cases, your company is only as strong as the people you have on your team. When it comes to making hiring decisions, look at each candidate for their revenue producing potential, even if they aren't in a typical revenue producing role. For example, administrative and support staff can be quite adept at negotiating discounts and identifying good deals. Product developers can focus on optimizing customer experience, which in turn, can lead to more revenue generation. Engineers can also keep customer needs front and center, again allowing an in-flow of revenue. Every good hire will directly impact the bottom line, so hire wisely.
5. Negotiate Payment Term
VC is not the only source in town when it comes to funding. Securing strong payment terms from your customers to fund your business can make a huge difference in long-term sustainability. If you can get monthly pre-payment terms, that's a good first step. Quarterly prepayments are even better. And annual prepayments can be a home run. Any discount you offer your customers in exchange for prepayment will be well worth it,
Yes, VC funding is the more traditional route for most entrepreneurs these days. But it doesn't have to be the only route. Finding a way to make your business sustainable on its own opens up a lot more options for the ultimate direction of the company, and allows you to keep a meaningful control position along the way.