Unicorn era getting you down? Take advice from an expert.
I’m a first time entrepreneur. After spending the better part of my career in the Bay Area, I can completely relate to the allure of chasing Unicorn dreams. I’ve been at parties in San Francisco where a bro introduces me to the co-host of the party who sold his last start up for $10 million, and a small part of me thought, ‘that’s pretty cool’.
My next thought was, ‘well, good luck, because you just admitted that you have no idea how to code’.
In a world where media idolizes the ability to raise exorbitant amounts of money, you simply don’t get headlines for running a profitable, steadily growing business. The tortoise actually beats the hare in real life start up land. Yet ‘bootstrapping’ just sounds unattractive.
Perhaps if we called it ‘crushing’ that would inspire more prospective entrepreneurs hidden within the bro bubble permeating the tech industry to take a different approach.
Waking up from a Bad Unicorn Dream
Millions of dollars in venture capital is an alluring prospect for most entrepreneurs. Partnering with the right VC not only provides immediate capital to scale, but also connects you with invaluable counsel when it comes to critical hiring, product and market-fit decisions. In fact, many VCs were successful entrepreneurs themselves and have built their firms around being strategic allies to entrepreneurs.
On the flip side, taking venture capital dollars can get you forced out as CEO of your own start up.
Similarly, stock options packages for a burgeoning late-stage Unicorn start up can easily be seen as the more conservative and wise choice than going the solo entrepreneur route. And, if you pick wisely, you win big, no doubt.
However, there is a downside.
If you give your prime years to another company, you’re putting your destiny into a management team and its ability to execute. And not every Unicorn has a happy ending: sometimes you end up getting screwed. Unfortunately, predictions there would be “a lot of blood” in 2016 have rung true.
Regardless of what you name it, in year three, my business is thriving, and I want to offer up some crush worthy advice for those select entrepreneurs who are looking to build a business profitably from the ground-up by themselves.
1. The First Year is the Toughest
First of all, you’ll need to find your motivation. Mine was by someone who told me ‘if you’re not with me for life, you’re not with me.’ Who says that? That was all I needed to put my entrepreneurial ambitions to the test. Come up with a memorable name. File for a LLC. Get a website going with optimized SEO. Have periodic conversations with a trusted mentor who has done it before.
That’s the easy part.
The first year is really about building a network. In the early stages of building Treble, I launched a VC firm pro bono to announce its new fund. I also launched several start ups for pennies on the dollar for what’s charged in my profession. Why? Because I believe in the power of the network effect. When you’ve built something unique that provides value, people talk.
2. Cash is Always King
At some point during my stints at previous agencies, between meeting entrepreneurs of early-stage start up founders and being the only rainmaker on a team of five charging clients a $20K per month retainer, I thought: there has to be a better way to do this. In my industry, I found that many PR agencies have a tremendous amount of bloat—excess layers of management—that forces them to charge higher prices to make a profit. I worked from my condo for the first 15 months before getting a small office. My only real operational costs were my legal costs (trademark and LLC – around $1500) and website costs ($3000 including business cards and stationery).
Clearly, in a product-oriented start up it’s a very different paradigm. The key here is to keep labor costs down until you’ve shown proof of concept. Have a clear plan in place as to what every labor cost is going to have in terms of ROI. VCs want you to be operating from a place of strength, which in the past year, has parlayed from top-line growth to demonstrating a lowered burn rate and the ability to scale efficiently.
3. Scale Elegantly, Not Violently
If you have the right talent in place and the right go-to market strategy, you can scale naturally. If you’re always profitable, there is absolutely no need to pair up with a VC when you can bootstrap, e.g., crush your way to $1 million in recurring revenue in 24 months. How do I know?
Because I did it.
I focused on serving existing customers and understanding their pain points, and putting systems into place to preemptively address every future customer issue. This was the key to ensuring recurring revenue versus a firework that fizzles out. There is absolutely no difference in owning 100 percent of a $5M revenue producing start up or owning 10 percent of a $50 million revenue producing start up.
Why Not Have It All?
Here is a quote from an Inc. article from one of the co-founders of Atlassian, a company that never took venture capital funding and IPO’d at a value of $460 million earlier this year:
“It is a validation of what we have built, which is a very disciplined and patient business over the last 13 years,” says Cannon-Brookes, the co-founder and co-chief executive of the company, who spoke to Inc. after the company’s debut on the NASDAQ Thursday. “I’m super excited for our crew that the world is noticing what a special thing they’ve built, it’s a different model and we have a huge opportunity.”
The words in that quote that stand out to me as an entrepreneur?: “Disciplined” and “patient”. “Huge opportunity” is simply icing on the cake.
In the recent Unicorn era of heralded funding rounds, the ability to bypass VCs and resist the allure of joining ‘the next big thing’ for the stock options to build something personal to you, to stay 100 percent in control of that dream and execute your vision systematically toward financial independence—well, quite simply, that’s crushing it.