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Wednesday, February 3, 2010
How I See It
5 tips to grow a company without VC funds
By Bobby Moulton, president and co-founder, Seven10 Storage Software
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In 2001, my brother Jim and I made the decision to leave our corporate jobs and start our own company, called Seven10 Storage Software. As with every startup, we faced the dilemma of how to finance our company.
We contemplated pitching venture capitalists, but realized that VC-backed companies often lost their identities quickly. We decided to take a different approach and grow the company through customer traction with a grass-roots sales effort. A leap into the unknown would test our resolve over the next eight years as the company would withstand two of the worst recessions the country has seen in generations. Thinking of taking a similar path? It’s not for the faint of heart. Here are five things you should keep in mind.
Be true to your vision and manage expectations
As you read about other companies opting for VC funding, you will feel as if you’re missing out. Combat this with an unyielding confidence in your vision and technology. Your vision, and your preparation for making that vision a reality should be your driving factor. You have control, and no one will be looking over your shoulder telling you what trends to follow or what people to hire. But foremost, understand that growth and revenue are not overnight sensations.
You are not a traditional CEO
While your title may say CEO, you are not a typical CEO. Becoming enamored with a title can signal the beginning of an end. Flexibility and humility are as important as any trait you can embrace in a startup. The best ideas are often those presented to you by employees, customers and partners — keep an open mind even if these ideas don’t dovetail with your master plan. As you hire employees, you’ll need to set the tone by wearing many hats. As CEO your job is to keep the company focused while advocating an unprejudiced approach to generating revenue.
Build a team, not a factory
Making a hiring mistake can set self-funded companies back months, years, or even to the breaking point. Every employee that is hired must be able to make an impact immediately. Serious thought must be put into this person’s role and, more importantly, how this person will work with the team. Finding the right talent to thrive in an environment where resources are scarce, but demand is intense, is almost an art form.
Penny-wise vs. pound foolish
As a startup with no VC bankroll, understanding the economics of a business is vital. Eliminate the urge to create two-year, five-year and 10-year pro-formas often requested by VCs. These take valuable time and energy away from running your business and are worthless in self-funded mode. While your technology vision is built for the long run, your economic insight must be for tomorrow. Establish detailed (not meaning lavish) spending plans for the immediate quarter and a rolling 12-month budget. Follow this model until you have a solid customer base, steady sales pipeline and stable product. All monetary decisions should have one overriding consideration: When will this investment lead to revenue?
Invest heavily in passion
Superior technology with superior marketing will be wasted without a passion to succeed. You have chosen the path of entrepreneurship because you believe you can make an impact. But the path is loaded with potholes, obstacles and naysayers. Every day, your desire will be tested and your conviction doubted. Never let them see you sweat. The life of a self-funded entrepreneur is a life filled with tremendous highs (that first ontract) and gut-wrenching lows (the rise of the well-funded competitor). But at the end of the day you will sleep well knowing that you have something that money can’t fund — the passion to succeed with a business built by your team.
Bobby Moulton’s Seven10 Storage Software in Lawrence provides archiving and disaster recovery.
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