Some time ago, a friend of mine was asking himself if he should raise fund. I have been thinking a lot about this question, changed my mind a few time. So here are some thoughts about it
TLDR: No. Don't.
Here's a short background story of my experience. When I started Datananas back in 2014, I was coding in my bedroom living in my parents' house when the business started growing. I had a few customers and started thinking about the folowing two options:
- Moving to Paris, finding a co-founder, raising funds and create something big
- Be cool and stay solo, get the cash and travel
I choose the first option, moved to Paris and found a co-founder to help me grow the business. We boostrapped a bit more, hired salespeople and raised a 1M€ round.
I do not regret this choice, because I learned a lot during these years, but more than 5 years later I would never make this choice again.
Here's why :
You don't need VC money
The first reason is simple: You really don't need that VC money.
Trust me, there are many many ways to get money to grow your business, and really building and distributing a SaaS can be done for almost 0$.
1. You don't need money to build the SaaS.
Yes, these days you really can build a SaaS for 0$ without coding skill.
Off course, it would ve best to learn to code yourself (that's what I didand trust me anyone can do that). There are now trilion of free ressources on the internet for that. Just find a course on Udemy for example.
2. You don't need money for distribution
There was a time where you had to invest a lot of money to create the software and distribute it on physical devices.
Good news, this is over. You can use Inbound Marketing to have customers coming to you, launch on Product Hunt or Appsumo and be instantely exposed to a lot of people, and even use crowdfunding to have some customers pay you to build your product !
There are even ways such as Opencollective to get sponsored to develop Open source software.
You will be trapped in the Golden Cage
I already talked about it in another article, but raising venture capital is one of the walls of the golden cage of entrepreneurs. There is no going back once you start raising funds.
You raise a seed? Then you will have to raise another round of series A, and then raise again or exit. You will be tied to your investors until the exit it done.
You can build something BIG without VC funding
If you think going the bootstrapped way allows you to build only side-projects and lifestyle businesses, you are very wrong. Bootstraping is not only for lifestyle businesses.
These two companies have been founded around the same time (2001 & 1998) :
- Mailchimp is fully bootstrapped and raised $0
- Constant Contact is VC funded, raised 23M$, then did an IPO
They both are now about the same size, having 1000 employees. I would argue that Mailchip is better known on the market and has a better product.
Baremetrics has interesting resources : https://baremetrics.com/blog/bootstrapped-vs-vc-lessons-learned-youre-silly
You can check those companies on IndieHackers. There are a lot of companies doing more than $100,000 MRR without having raised any funds.
Look at ConvertKit's revenue for example: https://convertkit.baremetrics.com/
These guys are doing 1.5M$ MRR fully boostrapped
And there are dozens of those companies : Basecamp, Braintree, Envato...
Boostrapping is fun. Cashburn is hell
Boostrapping means you will spend only the money you have, and this is a very good thing.
When raising a seed or series A, you will have at least some cashburn (otherwise you would need this sweet VC money right ?)
If you spend more cash than you earn, your startup has a death date and there is nothing more stressful to know that everything can stop in 6 months, 5 months, 4, 3, 2, then 1 month !! And I experienced this a few time, not knowing if everything would stop in less than a month, cancelling holidays, firing people, ... This is no fun.
Oussama from The Family says it often, but you have to make a choice: Fame or money. Change the world or change your life. This is definitely true, but who care being famous?? Do yourself a favour and build a business that makes you happy and improves you quality of life.