Here we go... the VC world talking about “surving hard times” with advice given in lots of words that can be summed up as “be prudent with your money”
I went through YC in S08, known unofficially as “the worst YC class”. It’s when the “RIP good times” Sequoia deck went out.👇
I went through YC in S08, known unofficially as “the worst YC class”. It’s when the “RIP good times” Sequoia deck went out.👇
What did we do with our company? We started to raise a small round, but half way through sent everybody their checks back because the amount of revenue we brought in from our customers that year was roughly equal. I called this Customer Capital funding.
The way we funded our work was by keeping an internal product backlog and putting a phone number on our website. If a customer called wanting something aligned with our backlog, we’d give them a quote, collect their money, and build it for them. It’s not rocket science.
It’s a very simpleton way of funding, and as of today we’ve only raised $20k in funding from YC and exceeded $10m in annual revenue a few years ago. If you take that path, the thing you’ll have to get over is the feeling of “validation” you see when your peers raise money.
I remember years ago at a YC event I got caught up in a circle of founders talking about how much they raised. $6m, $10m, etc. ... when it was my turn I said “20 <long pause> thousand” and got looks of disbelief, like something was wrong with me or I didn’t have a real company.
Now most of those companies are gone, and this was during good times when people describe the market as being “frothy”.
Even to this day, we don’t make the cut on lists like the YC 100 list (ycombinator.com/topcompanies/) because it’s mostly based on how much money you’ve raised.
Even to this day, we don’t make the cut on lists like the YC 100 list (ycombinator.com/topcompanies/) because it’s mostly based on how much money you’ve raised.
Today when I give advice to people who want to start a SaaS company, the first thing I say is, “try really hard to not have investors”. Talking about the size of your round is like talking about the huge loan you took out on your car or house. It’s not a good look.
Not “default raising” forces you to listen very closely to your customers and prioritize only the most important work & features. It’s a feedback cycle that’s far more productive than “we’re running out of money, what do we have to do to impress investors to raise more money?!”
Once you figure that out then you can worry about raising money if there is no other way to achieve your goals and is worth the added complexity of setting up a C-Corp with a board, shareholders, etc. Don’t treat it as a rite of passage because the extra complexity really sucks.
No matter how much you raise or how much revenue you bootstrap, you should always be prudent with how you spend & invest your companies money, even if times are good.
