Loading...
Answers
MenuWhat are some examples of bootstrapped companies that successfully scaled (to big proportions) WITHOUT VC funding?
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?
Answers
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.
The reality of
Depends on how you define big, but the easy answer is yes. We built our last company from nothing into a successful business. We were in the B2B space. Our customers when we sold included Apple, Xerox, Harley-Davidson,Chicago Bulls and many more. Never took a penny from VC's or Angels. When we closed the sale we owed nothing. We kept a line of credit, but never used it. When we closed it was for an eight figure amount. If you want to discuss more we are happy to set up a call.
Moz.com (originally SEOMoz.com) was built with credit card debt. You can hear Rand Fishkin talk about how he did that (and NOT recommending running up that much debt) in the video at http://www.growtheverywhere.com/rand-fishkin-moz/
Related Questions
-
How much equity is typically taken by investors in a seed round?
From my experience I would not advise you to go with Venture Capital when you're a start-up as in the end they will most likely end up screwing you. A much better source for funding would be angel investors or friends/family. The question of how much equity should I give away differs for every start-up. I remember with my first company I gave away 30% because I wanted to get it off the ground. This was the best decision I ever made. Don't over valuate your company as having 70% of something is big is a whole lot better than having 100% of something small. You have to decide your companies value based on Assets/I.P(Intellectual Property)/Projections. I assume you have some follow up questions and I would love to help you so if you need any help feel free to call me. Kind Regards, GiulianoGS
-
How do you make money to survive while you are building a business? What are some quick ways to make money with less time commitment?
I love this question. If you have to work on the side while building your business, I recommend doing something you absolutely hate. That keeps you hungry to succeed on your own. You'll also typically save your energy for the evenings and weekends where you'll want it for your business. Don't expect to make much money at your "other job" but you can work it to pay the bills while you build your business. This approach also forces you to build incrementally, and it keeps you frugal. This is not necessarily ideal. Having a bunch of money set aside sounds nice and luxurious, but not having the resources puts you in a position where you have to figure it out to survive. I love that. I started my business eight years ago on $150 and today we do a million a year. Don't wait until you have the resources to start safely. Dive in however you can. And avoid shortcuts. Don't waste your time scheming to make bigger money on the side. Do something honest to live on and create a business that drives value.CM
-
How was SnapChat able to grow so quickly?
I'm answering your question assuming that you hope to be able to replicate it's own success in your own mobile app. There are a couple of factors responsible for it's growth that are instructive to anyone building a mobile app. "Leveraging the intimacy and privacy of the mobile phone." We now have an *intimate* relationship with our phone like no other device in the history of technology. Every internet company that started before around 2010 has built their core interactions around "the old web" one which was accessed primarily via a browser on a computer. Companies that start with a clean slate, should be building their interactions around how to do whatever the app is supposed to do while leveraging what is unique to people's relationship to their mobile devices. Photo-sharing has become a core part of the way we communicate now. Snapchat built something that provided an experience that leveraged the feeling of privacy and intimacy that is unique to mobile. "Provided an escape from the "maturity" of other online services." Too many parents, aunts, uncles and other "old people" have encroached into the social networks of teens and young people. As a result, they've had a desire to find places to express themselves in places inaccessible by older generations. An important distinction is that it's not just parents and relatives that young people are trying to avoid, but also employers & colleges who are increasingly using "mature" social networks to review applicants. "Leveraged PR even bad PR" The fact that the app got so much press about it being used to sext was perfect PR for the company, as it essentially reinforced the brand experience that it has today. Essentially, "if it's safe enough to send a sext, it's safe for any kind of communication I want to have." And although the safety and security of Snapchat is actually not as advertised, it still enjoys the reputation of having less impact than any primarily web-based service. Building a successful mobile application is one of the hardest challenges to face designers, programmers and entrepreneurs in the history of writing software. Happy to talk to you if you're considering building a mobile app, about what I've learned about the "table stakes" for success.TW
-
What advice do you give to a 16 year old entrepreneur with a start up idea?
First, hat tip to you for being a young entrepreneur. Keep it up! If you have the funds to build out your MVP, hire a developer and possibly a mentor. If your idea is marketable, you don't need to give up equity by bringing in a co-founder. If this is your entrepreneurial venture, I would recommend you do retain a coach to help you see all the things you may not know. Have you already done your SWOT analysis? Have you identified your target market? What is your marketing plan? What will be your operating expenses? There are lots of questions to ask. If you would a free call, I'd be happy to help you in more detail. Just use this link to schedule your free call... https://clarity.fm/kevinmccarthy/FreeConsult Best regards, Kevin McCarthy Www.kevinmccarthy.comKM
-
What happens to a convertible note if the company fails?
Convertible notes are by no means "earned." They are often easier to raise for early-stage companies who don't want to or can't raise an equity round. Equity rounds almost always require a simultaneous close of either the whole round or a defined "first close" representing a significant share of the raised amount. Where there are many participants in the round comprised mostly of small seed funds and/or angel investors, shepherding everyone to a closing date can be very difficult. If a company raises money on a note and the company fails, the investors are creditors, getting money back prior to any shareholder and any creditor that doesn't have security or statutory preference. In almost every case, convertible note holders in these situations would be lucky to get pennies back on the dollar. It would be highly unusual of / unheard of for a convertible note to come with personal guarantees. Happy to talk to you about the particulars of your situation and explain more to you based on what you're wanting to know.TW
the startups.com platform
Copyright © 2025 Startups.com. All rights reserved.