Great post. We’re a VC firm, so we’re obviously more fond of this “BS” than many founders, but this CEO is sharing important wisdom. We believe the market needs to move towards “efficient entrepreneurship.” Take less, make more. VC is a powerful tool—but it’s not the right tool for every company.
The tech industry also needs to do a better job celebrating the success of companies that have found alternate paths to success. For example:
- It’s very possible to build a billion dollar business with no venture capital. Atlassian, Lynda, Wayfair earned billion dollar price tags with no real VC (some late stage PE, but nothing in the formative years). Mojang turned Minecraft into a global sensation without once visiting Sand Hill Road.
- Shutterstock proudly bootstrapped its way to a billion dollar IPO.
- SimpliSafe built a complex IoT system with hardware and software components with just $2.5M in VC. CarGurus has a $150M+ run rate with just $5M in.
- One thing that’s hard for many founders to understand is the importance of designing their business models to be capital efficient. ToughMudder is a capital intensive business, but the founders figured out how to optimize their cash conversion cycle to pre-fund the development of obstacle courses. PaintNite took an old retail franchise model and turned it on its head by partnering with existing bars. ~$10K investments have turned into hundreds of millions in revenue.
- There’s also a misconception that you need hundreds, even thousands of people to make an impact. Plenty of Fish, WhatsApp, and Twitch all enjoyed amazing exits with small teams. Reddit, Imgur, and Craigslist are top 15 sites in the US and achieved their dominant positions with ~50 employees each.
- Though it’s painful, struggling to raise funding can actually be a blessing. One of our most successful companies has struggled to raise funding at every stage and it has made the company smart and savvy.
- It also pays not to raise capital. Compare the Huffington Post and TechCrunch. HuffPo sold for $300M+, TechCrunch sold for ~$30M. Arianna Huffington made ~$18M, TC’s founder Michael Arrington made ~$24M.
We’ll be sharing more on this topic shortly, it is terribly important, and thanks for sharing this founder’s story!