Ask HN: Non-VC backed founders, any tips on growth?

I&#x27;ve been building a company for the last 10 years. For the first 9, no VCs ever contacted us. In the last year, we&#x27;ve gotten pounded with requests, and have thus far declined to talk, but maybe will eventually.<p>So my tips:<p>1) If you are going to raise money, decide to do it and go at it hard. Talk to lots of investors, all at once. Until then, I wouldn&#x27;t meet with any investors. Just thank them for their interest and tell them you&#x27;ll contact them later if you decide to raise money.<p>2) To decide whether to raise, start with your goals. Decide what you want to achieve with the company, then analyze your company (business plan, spreadsheets), then choose whether to raise now, later, or maybe never.<p>What you want to achieve is isn&#x27;t a simple sort of expected value (EV) question, for a profitable, boot-strapped company. You may prefer to take the option that maximizes the chance of a certain level of return for shareholders, over the option that maximizes the absolute EV. It depends what you want, what your risk tolerance is, what you think your business can achieve, and whether you think VC money helps you get there.

Don’t raise money if you don’t know how you would use it. VCs are asking for a piece of what you built. If you decide to give it to them, you’d better get something that you really need in return.<p>Don’t accept money just because other people do. Don’t accept money out of fear (i.e. what if competition has money). Don’t rush into a deal without understanding the terms.<p>If you believe that not having money will be a bottleneck for your venture in the near future, then it is a good idea to accept investment. Since you are in a position of strength, it’s worth finding good investors and structuring a favorable deal. If money will just make things slightly more convenient&#x2F;comfortable, it will be worth just pushing through without it.<p>Just my 2 cents.

When I interviewed at a startup for my current job, I asked the CEO, &quot;Why did you take investment instead of bootstrapping?&quot;<p>The CEO answered the question for me:<p>&gt; A company takes investment so that it can grow faster than it can with organic growth.<p>So, if you&#x27;re happy with organic growth, avoid outside investment. If you want (or need) to grow faster than you can with organic growth, then you need outside investment, (and the maturity and willingness to adapt as your company changes.)<p>For what it&#x27;s worth, this also depends on what kind of business you&#x27;re in. If it&#x27;s something that can grow fast, someone might point to your startup to justify demand in your space, take outside investment, and grow so fast that they push you out. (Hopefully your &quot;organic&quot; company could figure out a way to cash out before your customers flee to the well-funded competitor.)<p>Otherwise, If your business is niche, the market might not be big enough to justify investment, and you can continue to comfortably grow at your own pace without risk of a well-funded competitor eating you for breakfast.

I have started and sold a number of business without involving VC money myself. I don&#x27;t hold any magic wisdom, but here&#x27;s what worked for me (and is what I&#x27;ll continue to do). My recipe is not one that leads to anything like getting rich quick. Instead, it leads to growing a solid business over a longer period of time (7-10 years for me).<p>As rapidly as possible, I get a revenue stream going. That stream is never really what the business is intending to do in the long run (although is should leverage the same assets -- code, people, etc. as the ultimate goal needs). This can happen in a bunch of different ways. I&#x27;ve done things like licensing libraries of core functionality to other software shops, engaging in consulting services, selling stripped-down &quot;light&quot; versions, etc.<p>The goal here is to achieve self-sufficiency as rapidly as possible. A huge part of this is to avoid growing expenses too quickly: put off hiring anyone for as long as possible, don&#x27;t get fancy when it comes to office space and equipment, etc. And don&#x27;t expect to pay yourself for a long time.<p>I&#x27;m a big believer in startups running on a shoestring. From my observations, it is usually harmful for a business to be too well-funded too quickly.<p>After that, only grow at the pace that your revenue stream can support. If there&#x27;s a growth opportunity but you need to go into a lot of debt to take advantage of it, don&#x27;t do it. There&#x27;s no such thing as a &quot;once in a lifetime&quot; opportunity.<p>Debt can&#x27;t always be avoided, but only take it on if you&#x27;re going to lose a lot more money if you don&#x27;t. (Lost opportunity doesn&#x27;t count as lost money).<p>Also, take maximal advantage of the primary thing a startup has over an established business: flexibility. Your business will develop its own idea of where it wants to go, and that may be very different than what you had in mind on day one. Listen to it, it&#x27;s smarter than you are.<p>Anyway, as I said, this is (scratching the surface of) what works for me. I have no idea of whether or not it would work for anybody else.

As a founder that has built a VC backed business to $XXXM in revenue and now as a founder that has built a bootstrapped business to $XM in revenue I guess I&#x27;m in a unique position to answer this.<p>They both have their pros and cons as many people here have said. VCs allow for faster growth, greater risk taking, focus on other things such as culture and team, and sometimes you get tangential benefits such as PR and exposure. However, the downside is dilution, complicated cap table, growth at all costs (including profitability), infighting, differences in opinions and direction, and if you keep going down the VC path, ultimately you might realize you&#x27;ve built a company that doesn&#x27;t feel like yours anymore. But hey, if you IPO one day at $XB dollars, everyone wins right?<p>For bootstrapping, the pros are you control your own destiny, work life balance can be great, you get to make all the decisions, you don&#x27;t have to do anything you don&#x27;t want to do. The cons are you live and die by your customers, growth can be sloooow, you have to watch every expense, money is always an issue, it&#x27;s hard to pay employees top dollar.<p>There are ways to get money without VC, there are many small business loans out there, there&#x27;s also friends and family which you can also get loans from, it also feels more real to live off of profit - which I think many companies in SV don&#x27;t know how to do. You can also raise from Angels with non-traditional VC terms such as profit sharing.<p>As to which I personally prefer, I think there&#x27;s something great about bootstrapping and living off profits. It&#x27;s liberating and freeing... but I&#x27;d also be lying if I said that VC money doesn&#x27;t tempt me every now and then. Ultimately I&#x27;m lucky in that we&#x27;re profitable enough to grow at a decent clip without VC dollars so that&#x27;s the best thing I can ask for... so for me, bootstrapping so far has been pretty great.

For the enterprise app:<p>1) Ensure your ACV is greater than $3000<p>2) Scale out an outbound prospecting inside sales channel<p>3) Scale paid ads on top of outbound prospecting<p>4) Create a promotion strategy&#x2F;mix for your growing email list<p>5) Scale content on top of paid ads<p>6) Ensure $1 into the customer acquisition machine spits out $3.<p>7) Explore channel partners, affiliates, replacing yourself with a professional management team, or raising growth capital on very founder friendly terms, etc. if you&#x27;d like<p>I help B2B SaaS founders scale to $1M ARR and beyond with outbound prospecting inside sales funnels. If you&#x27;d like to learn more, happy to discuss harry [at] convopanda.com

If you&#x27;re a SaaS company that can get new customers using paid advertising, I would use revenue financing instead of VC. It&#x27;s a new category of financing that&#x27;s been created for SaaS companies within the last couple years, and the terms are much better if you&#x27;re one of the companies where it&#x27;s a good fit.<p>(Basically you need to be doing something that people are Googling for.)

Outside money is helpful if you want to grow in a specific direction and want to do it fast to make sure you get there before competitors do.<p>It sounds like you have a nice thing going, there&#x27;s no need to jump into the deep end if you don&#x27;t have the ambitions to.<p>A lot of VCs talk about raising money as &#x27;the big leagues&#x27;, and the takeaway from that is: success is judged as performance against expected returns. Perform or get out.<p>If this doesn&#x27;t sound like what you want, then don&#x27;t take VC $. If you&#x27;re ambitious and it sounds like an interesting challenge then maybe it&#x27;s something to consider!

Read Traction by Gabriel Weinberg and Justin Mares. Work on trying different marketing channels and sales processes until you have something consistent and repeatable that you can scale to another sales person. Then consider if adding money to that process will accelerate you in a way that is worth giving up equity and some control for. Also, too many cooks is a real concern. Think hard about the speed with which YOU want to grow the business.

You already made it. VCs aren&#x27;t risking much at this point, your business idea and execution was validated by market already and they would push you for 500% YoY growth, likely destroying you in the process. IMO unless you want to risk everything to rule the world, avoid. If you are in the exponential growth phase and your capital is not covering your operational expenses and you have to throttle down your business, get a loan instead.

Well, this was awhile ago so I don&#x27;t know how relevant the advice is today, but when I did a startup in the 90&#x27;s we didn&#x27;t take any angel money for over a year and until we had our first live customers. What we did was run super cheap, crappy office space, minimal everything, didn&#x27;t take any salary ourselves. We wrote code all night and called prospects all day. I was never really comfortable cold calling, but I learned to be. We were selling to banks and called anyone we could find contact info on. Not spending any money we didn&#x27;t have to spend, and not giving up until some people said yes, basically.

Sell a product that people want to buy and then don&#x27;t run out of business making that product. If you have traction already, leverage it. Keep costs super lean. Expect slow but steady growth. The only reason to take VC money is if you are reasonably certain someone with better funding than you could eat your lunch. How to know if someone can eat your lunch: do you have any IP or trade secrets or secret sauce? No? Maybe you should raise VC money, but realize you will be competing on execution and not on special sauce.

Getting a VC usually sounds like a good idea and is definitely the myth that we were all told that without a VC you cannot succeed.<p>This is actually not true. If you have clients and your having enough money to pay yourselves a little bit, ride that wave. Focus on growing your business with more satisfied clients and building a brand. VC money can be useful if you see a small but very lucrative opening that will get you to get 10 to 100 folds more return and your clients cannot advance you money for that. If you’re lean enough and running a tight ship, building only features that have great value for the customers; have great channels to grow your customer base; and are financially sustainable; then why a VC?<p>And remember, the longer you run your company without external funding, the better the return is later for you and your friends, whether you decide to sell, IPO, or get VC. You will always own more of your company.<p>But if you’re close to bankruptcy, because of your burn rate , and you’re still growing, then maybe start raising money when you have 6 months or so worth of runway left.<p>PS: I do have some doubts about the 2 startups though. If you’re running 2 at the same time, then you’re not in any of them 100%... And that’s not in the best interest of your startups

Do you have a goal&#x2F;direction in mind for the end state of the company? (Acquisition, IPO, Lifestyle business etc)<p>It&#x27;s totally fine if you don&#x27;t but I would work on figuring that out with the team, so that incentives are aligned, before making a decision on fundraising.<p>Also, I&#x27;ve noticed that there&#x27;s alternative sources of funding for bootstrappers, that seem to be less demanding in terms of equity&#x2F;growth&#x2F;returns that might be more appealing.<p>As in, if you want to hold on to more equity or grow at your own pace.<p>A great article that was posted on HN: <a href="https:&#x2F;&#x2F;medium.com&#x2F;swlh&#x2F;alternative-funding-calculus-a-quant-comparison-of-tiny-indie-and-earnest-8d61d35d5ad5" rel="nofollow">https:&#x2F;&#x2F;medium.com&#x2F;swlh&#x2F;alternative-funding-calculus-a-quant...</a>

&gt; <i>&quot;I am involved in two bootstrapped startups&quot;</i><p>You&#x27;re way smarter than me if you can juggle two companies. Grow by focusing on just one?

If you really have product&#x2F;market fit and know how to find and sell to customers most of the risk is gone.<p>Why not use debt?

Sorry about side-tracking your post a little bit, but do you mind sharing what you did to attract enterprise clients? Trying to get paid enterprise clients without connections from a past life or connected investors while you&#x27;re starting out seems like a very difficult task for me. They seem to expect either a reputable investor (doesn&#x27;t exist if boostrapping) or proven track record on the product from other customers (doesn&#x27;t exist if you&#x27;re starting out). Thanks for any help.

Check out www.indiehackers.com There&#x27;s a strong community there of people who are doing exactly what you are all at various stages of growth- someone who&#x27;s business is within stonesthrow of where you are and in the direction of where you want to go may be in the best position to help advise you to get to that next step. (check our their podcast, might be useful for you)

Finding good value added resellers has helped us avoid having to raise money. They are the sales team that we can&#x27;t afford.

My answer to this is if you have to ask if you need the money you need the money. Why? Because you are entirely discounting the benefit of having an experienced VC and firm and what they can give you. Sure you can take time and DIY the process and people have done that. But in the end it might make more sense to have someone to lean on and to give up part of the business for that value.<p>And how would anyone&#x27;s in particular guidance (here) apply anyway? What they are doing is most likely not what your are doing or whatever luck they had or didn&#x27;t have is not what will happen with you.<p>&gt; We have been approached already with VC offers, but I am just so hesitant to let someone else in. Sometimes (read: lots and lots and lots of times) something that started as a noble pursuit ends up being corrupted by all of the cooks in the kitchen.<p>A great big &#x27;it depends&#x27;. One thing is for sure in a battle between a well funded company that can afford to experiment and have losses and one that can&#x27;t (because it&#x27;s bootstrapped) the well funded company has a super big edge. You know as they say &#x27;all else equal&#x27;.<p>&gt; we do not really need the money or investments as we have some earnings keeping us afloat<p>Well there you go &#x27;keeping us afloat&#x27;. Would you like to not have at least that to worry about?<p>(My perspective. Back in the day &#x27;pre internet&#x27; what I did worked but was not the type of idea that investors would fund. As a result attention had to be paid to every cent spent and every single decision had to be dead on. Was a profitable situation and I sold it. But no doubt having capital and even giving up control would have made things better (but was not possible for a host of reasons). Also today I do various work for startups and I can see the flexibility they have because they can afford to (and this is super important) make mistakes. That is a very very very big advantage that you can&#x27;t easily do when self funded.

Funding is not everything in our industry and good VCs offer lot more than money. Think broadly about these things.

If VCs are reaching out to you, that&#x27;s a sign you&#x27;re doing something right- and as long as you can literally afford to keep doing it yourselves, keep doing it yourselves.<p>VC&#x27;s won&#x27;t corrupt your work, VC&#x27;s are there to fill in blind spots, gaps, hiring, board, things you probably aren&#x27;t good at because that&#x27;s not your focus right now.<p>You can find incredible VC&#x27;s who will take your company places you could never have imagined- but right now, if you can afford it- why bother.<p>Taking on advisors is a great tool though as well as VC&#x27;s, the equity cost is like percents of a percent for all of them and you get X hrs&#x2F;month of resources. If you&#x27;re building tools that require specific regulation requirements, etc.. then you add a regulator as an adviser.

Taking VC money is a lot like a record deal. You&#x27;re giving up some amount of control in exchange for resources and validation now. Record deals and VC deals are not for everyone. I think the way to determine that is to decide what your personal goals are and ask your teammates the same thing. I think you also need to be very realistic about your market and idea, if you have a multi-billion dollar idea you&#x27;re going to need backers... if you are already paying the bills and can dominate a smaller market without more funding that might be ideal for you? This all comes back to what you want, once you know what you want all the other decisions get much easier. Good luck! :)

There are investors out there who don’t insist on control. I know of at least two - IndieVC and Earnest Capital. Their investment can be paid back in cash over time from earnings.

If you need capital and have revenue or, better yet, past break even, consider reaching out to small family offices. They may be interested in a good investment but not expect a venture scale outcome. If you’re past the seed stage and can show them a path to a good outcome that may be a good option.<p>If you have enough cash, buy a building, then get a mortgage to get your money back. Now you are building a balance sheet and have cash with a low interest rate.

Running SerpApi.com. My main tip is to be as transparent as possible. Both internally and externally. The competitive edge that you are having by holding secrets is not worth the headaches of managing them. Even in our industry. Regarding potential investments, share you numbers and try to see if it makes sense for you against what they are bringing.

I don&#x27;t know much about your situation, so tough to chat about growth, but it is our priority at the moment as well after also reaching PMF.<p>Why is your growth relevant to only Non-VC backed founders?<p>It may be easier to provide suggestions if you describe your business rather than describe why you don&#x27;t want VC money. Perhaps I&#x27;m misunderstanding.

Your clients. They know people who may need your product, request them to introduce you.

It depends on your market. If you&#x27;re in b2b with big companies you can partner on solutions if you have some core that is special. For consumer you&#x27;ll need to solve at least one problem well enough to get cashflow.

you NEED some capital if you want to see 10x growth.<p>you have to decide, do you want to be beholden to growth, growth, growth and chase a payout? or not.<p>this is a question that has no answer. if it started as a &#x27;noble pursuit&#x27; and not as a personal wealth engine, and you want to keep it that way, just turn them down. sure, it&#x27;s easier said than done.<p>keep in mind what both scenarios look like 5-8 years down the road: success <i>and</i> failure.

It would be helpful to know a bit more about your situation; if I were on your board, here are the starting questions I would have to help you figure out what you want to do.<p>* Are you definitely dominant in your niche? If so, how long can you remain so while &#x27;just&#x27; reinvesting profits? How big is the niche?<p>* Presuming you are and can definitely stay the dominant one, are there target areas next to your niche you&#x27;d like to go after and can&#x27;t because of capital?<p>* Would additional capital let you add revenue through new features &#x2F; adjacent product enhancement?<p>If the answer to any of these is that more capital would be helpful, either to make more money, stabilize the business, or grow the value, then you need to figure out how you want to take that money on.<p>Generally there are three ways businesses get additional capital: equity finance, debt finance and trade partners.<p>My guess from your question and how you explain your business is that if you sit down and take a cold hard look at where your business is at, then you will conclude you have some real risks, and money will help mitigate those risks.<p>This is a tough mental game to play as a startup founder, you have to stop thinking product vision for a little bit, and switch it around, and be like &quot;I&#x27;m X product manager at Y company &#x2F; just VC funded &#x2F; my enemy from junior high who is rich, and I want to fuck us up and drive us out of business. How do I do that?&quot;<p>Once the business is real, and has real ongoing value, then <i>part</i> of your job is mitigating those risks. Usually the right way to do that is to grow the business into a dominant market position so that you&#x27;re not vulnerable, and that&#x27;s (part) of the thinking behind taking money -- so that you can grow rapidly, and get through that risk period where anyone might notice you&#x27;ve got something good here and come take it away from you.<p>So, how do you figure out debt&#x2F;equity&#x2F;trade? Short answer is that trade is almost always preferable if you can get it -- details depend on your product and industry. Between debt and equity, it varies, all the time, and will vary at the stage your company is at.<p>In brief, though, at its best, you&#x27;ll bring on real partners with VC money, people who will guide you, kick your ass, help you, and end up with a significant portion of your company in exchange. (At it&#x27;s worst, it&#x27;s much, much worse than that). If you bring on strategic investment from the in-house VC teams at your customers, that has a different flavor. If you get big enough to have an interesting stable return rate for Private Equity, that&#x27;s again a different flavor, with different expectations about your team -- it doesn&#x27;t sound like you&#x27;re their yet, BTW. :)<p>Debt comes in two flavors, recourse and non-recourse, essentially are you going to give them your house if you fuck up -- and they&#x27;re priced differently, and it&#x27;s harder to acquire non-recourse financing.<p>Enjoy where you&#x27;re at! It&#x27;s nice to have something working. And, finally, remember you cannot undo an equity round - they lost longer than many marriages - so tread carefully.

Hire a sales person.

Others have mentioned the downside of having venture capitalists hanging around, wanting an &quot;exit&quot; -- a way to get their money back tenfold or so.<p>A couple of other observations:<p>1. VCs only crowd around trying to invest in you when you don&#x27;t need the investment. If you actually needed more capital to keep going, they&#x27;d be hard to find.<p>2. they&#x27;ll make your ownership structure more complex. Read about cap tables, preferred shares, and participating preferred shares, to learn a bit more about this. All the complexity favors them, not you.<p>A suggestion: if you need an investment in your enterprise business, ask one of your customers to invest, or to pay for some development that benefits them. Enterprise customers do this. And they&#x27;re far more patient than VCs.<p>Another suggestion. Think of your businesses as businesses. Unless you&#x27;re looking for a quick exit, you have more in common (in terms of bookkeeping and finance) with a local bookstore than you do with a typical VC-funded startup.<p>Ask yourselves these kind of questions:<p>Are you making enough money to meet your expenses and payroll? Are your customers happy? Do you like making and selling your product &#x2F; service? Do you want to keep doing it for a few years into the future? If the answer to these questions is &quot;yes&quot; then great.<p>Looking to the future:<p>Need for funds: Will you or a partner need to take some money out of the business at some point to pay a big bill or two (college fees for kids and the like)? If so, how will you manage that?<p>Succession: What if you and&#x2F;or a partner wants to retire? Are you funding 401Ks for yourselves and your employees?Can you sell the business, or have a younger family member take over?<p>A final suggestion. There&#x27;s an outfit called SCORE.org. Use them. They&#x27;re affiliated with the US Small Business Administration. &quot;Service Corps of Retired Executives.&quot; They offer free (yes, really, free) and confidential advice to business owners. You can ask general questions like &quot;here are our books, what do you think?&quot; or specific questions &quot;How can we get new customers in Europe?&quot; &quot;We&#x27;re growing and need to move, how can we make sure we get treated fairly?&quot; and &quot;We want to sell the business in ten years; how can we prepare for that?&quot;<p>I&#x27;ve volunteered for SCORE and can vouch for both their cost (0) and their confidentiality. My fellow volunteers were really wise folks; I learned a lot from them. We were NOT ALLOWED invest, or even offer to invest, in the businesses who used us. And the NDA we signed has teeth. It was with the feds; the FBI has been known to go after SCORE people who abuse the trust of their clients.)