This is a guest post by Stephen Belomy, US CEO of website builder Jimdo
In my 30 plus years of business, I’ve been an executive, advisor or investor in over two dozen companies. Some have been VC funded, some were angel funded, some were family funded, and some were classic one customer, 18-hour workday, sleeping in the office, eating top ramen, worrying about every paycheck, bootstrapped endeavors.
From this experience, if I have any advice for young entrepreneurs, it would be to not take VC funding unless it’s absolutely necessary. When I say absolutely necessary I’m talking about startups building rocket ships or semi-conductors needing a new fab plant. I’m certainly not talking about a software-as-a-service company with a business efficiency tool. VC funding can make founders lazy, meaning loss of drive and focus.
Now, you will notice I qualified my statement by saying VC funding “can” make founders lazy. This is obviously not the case with all founders and every company. There are many, many examples of amazing companies who took VC funding. Of course I could point out the math that only one in a thousand companies seeking VC funding actually receive it, and chasing VC funding can be the beginning of the end for a company for this reason alone. But that’s not my point.
Jimdo, the company for which I became US CEO in June of this year, actually turned down an eight-figure VC funding last year. That spoke volumes to me of who the three Jimdo founders were as people, and what type of company they were building. The great product, the amazing teams in the US and the home office of Hamburg, or our company’s care for our free as well as paid customers, are a result of team unity, a common vision, and a great culture. And nothing more said to me that they had this unity, vision and culture than when I learned of their decision to decline VC offers.
So, if you’re not going to take VC funding, what do you do? There are a number of things that I feel are critical to bootstrapped survival; but let me make one thing clear. You do need money to run and grow your business. As an alternative to VC funding, consider the following sources of money: Friends/family, angel investors, bank loans, credit cards, crowdfunding, strategic partnership investments, government loans/grants, consulting services, receivables financing (selling invoices and POs for cash), merchant bank financing (lending against future credit card receipts based upon past history), and sales.
You’ll notice that I ended that long list with sales. There is a reason for that. It’s the most important revenue source. Obviously, to get revenue right away, especially for a new startup, you have to build a great product. You also have to be smart with your decisions on financing and resource allocation, and you will need to make sacrifices. This is especially true when it comes to what you pay yourselves as founders, and what’s left to pay the talented team you need to succeed. And if there are multiple co-founders, you have to have common conviction. Without this unwavering belief in each other and what you are doing, you will lose team unity, which means your product will suffer. The inevitable result of that will be losing, or never attracting, paying customers.
Lastly, and most importantly, you must focus on hiring people who share your vision, passion, and conviction. This lets you build a company that feels like a family, a true brotherhood and sisterhood. I’m lucky to have found a company where I deeply feel connected to my fellow team members in this way.
Bootstrapping your own company is not an easy task. If you chose this path, you are in it for the long run. There are no short cuts. Jimdo started in 2007, and has been profitable since 2009. We now have 170 employees with offices in four countries, and our users have created ten million websites. All of this was accomplished not with VC funding, but with a unified, product-focused team. At Jimdo we say ‘Pages to the People!’ To an outsider, it’s a tag line. To us, it’s our mantra for how we are passionate about each other, our product, and our customers.