Running a startup isn’t easy. Sure, it seems thrilling and glamorous: being your own boss, traveling around the world to pitch and raise funds, and making the headlines with your groundbreaking idea.
But it can also be a nerve-wracking process, especially when it comes to fundraising. Anyone who’s started a business will know that cash flow is on your mind, particularly when you start to have a team and office space. If you want to scale, you’re going to have to grow your team and invest in things like marketing to make yourself known.
Chances are, you’ll be looking for investors early on to support you as you develop your business to be able to grow even faster. This is also what most of us believe to be the normal route for a startup, with headlines about investment series breaking every day.
And yet there is an alternative that’s slowly growing in popularity: self-funding.
It may seem daunting to take the plunge, but that’s exactly what we decided to do at Recruitee, in 2017. Based on our experience we’ve put together the top seven steps you can take to become self-funded and run a sustainable startup.
PUT YOUR PRODUCT FIRST
We developed Recruitee out of pain point we felt ourselves as we were recruiting. We’ve always put our product at the center of all our decisions, which means our priority is to ensure it’s user-friendly, fun, and accessible to everyone . . . Focusing on your product first helps you make decisions with that in mind. It forces you to ask yourself what problem you’re trying to solve with your product, rather than chasing after opportunities for investment, or developing solely based on input from partners. This should also mean you deliver a product that works for your customers and has product-market fit, rather than one that resonates with investors’ financial plans.
KEEP YOUR CUSTOMERS CLOSE
Your product is, of course, important, but without people to use it, it’s nothing. It’s always been important to us to ensure our customers are successful in using our tool. We want to reduce the impact of their pain points and help them do their job. If you’re able to do that, they’re more likely to come back or stay with you for the long-term. With happy customers, you can focus on growth and acquisition based on previous success stories and key learnings.
THINK OF YOUR CUSTOMERS AS YOUR INVESTORS
Once your product is successful, you’ll start to grow your customer base. So view them as your investors. What they pay to use your product is what will help keep you afloat in your self-funded journey. Treat them as you would treat investors, all while recognizing that this option offers you more freedom.
THINK LONG-TERM IN YOUR DECISION-MAKING
If you raise funding, you’ll be calculating your burn rate and thinking about how to spend your newly acquired money—not to mention, investors will probably have an opinion on how it should be spent. This often means that decisions are made with a short-term vision, which impacts your business in multiple ways. When going the self-funded route, take the time to think of your vision for the company in the next five or even 10 years. What foundations do you want to build it on? How will you get there? Making financial decisions based on a long-term plan means you will spend your money differently and pick your investments wisely in a way you wouldn’t if you suddenly had $10 million in the bank.
THINK SCALABLE AND SUSTAINABLE
As a small bootstrapped business, you won’t be able to travel across the country at a moment’s notice to meet potential customers in glamorous locations. You also might not be able to hire all the staff you think you need or invest in all of the marketing channels. To make sure you’re still investing in your business and giving it the attention it needs, think in scalable and sustainable terms. For us, that meant we took most sales meetings online via conference calls. That didn’t prevent us from succeeding, as today, we have over 3,000 customers.
GET CREATIVE WITH YOUR BUDGET
When you’re self-funded, every penny you have counts. That means you’re going to need some out-of-the-box thinking on how to get what you want and how to spend your limited resources. While this may seem scary, it’s actually a good thing. It helps you exercise some restraint and invest only in the necessary items until you’ve reached financial sustainability. For example, which of your marketing channels will give you the most bang for your buck? Which of your employee benefits are the most important to you? Which area of the business needs to be invested in as a priority? You might be surprised by what you can do with less. And if the amounts on your invoices scare you at first, there’s plenty of solutions. You can ask to split the cost or pay in installments, or ask your vendor for a discount.
FOCUS ON YOUR CORE COMPANY VALUES
At the heart of your business are your company values, and if you’ve decided to go the self-funded route, that says something about what you stand for. As a founder, what is it that you believe in and what drives your business? What are the principles by which you want to run the business, and how will that be reflected in the way you work? If you are clear on your values, you’ll be able to use them as guiding principles when you have to make decisions. It will also help you in hiring talent, growing your team, and creating a company culture that can scale.
Becoming self-funded is definitely not an easy decision to make, but it’s one that can really pay off as Mailchimp, Wistia, and others have proven. We’re not suggesting that the above are foolproof steps that guarantee success. Every business is different. But we do know it’s important to ask yourself the right questions and challenge yourself to think differently.