I want to build a B2B product, but I want to do it without VC funding. Am I crazy? Will I be forever doomed/preventing my company from scaling?
I'm the Founder of a VC-backed company and I'm also an investor in a handful of other companies that are venture-backed.
I'll answer the meat of your question. If you're building a B2B product, you *should* do it without VC funding.
The reason for this is simple: Amongst the criteria of investment decisions for VCs, the most important is the belief (supported by evidence) that the business can become a Billion dollar business.
For consumer companies, revenue is currently proving to be a constraining factor in valuation. In other words, in optimizing for selling equity at the highest valuation, consumer companies are best to make no money at all.
Enterprise companies are evaluated mostly on their current revenue, their pipeline, and core metrics around the business model and selling model and have a much more constrained set of valuation criteria.
Consumer companies almost always require considerable funding to grow because they lack sufficient means to generate revenue until significant scale. This is not the case with B2B.
I'm of the view that true B2B startups should be generating revenue from day one. Even if you intend on having a freemium model, it should only be rolled-out after you've launched to serve paying customers.
A B2B business has to first have a clear credible path to $100k MRR (monthly recurring revenue) in order to attract institutional seed and Series A funding.
Unless you're really on that path, you're best to avoid venture funding altogether. Reinvest your revenue into growth, stay lean and when you exhaust your own resources, raise under $1,000,000 in funding from angel investors and consider that the last equity money you ever raise until you are clearly and credibly on track to achieve $100k MRR. And by the way, achieving this incredibly difficult metric isn't the only requirement. Your Total Addressable Market has to be also significant enough to show that you can get to at least $100m ARR.
By the way, once you generate $1m in annual recurring revenue, you will have access to debt facilities that can fund your growth with far less (if any) dilution.
So I would posit that the vast majority of great B2B products will fail to achieve VC fundraising simply because most great B2B products don't *need* to achieve these proof-points for them to be fantastic businesses for a relatively small shareholder group.
I think a lot of entrepreneurs are getting really terrible advice and being pushed to lie to themselves and others that they are capable of and even want to swing for the billion-dollar outcome.
Happy to talk through this answer with you in more detail over a call.
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