Most early-stage technology startups dream of VC financing. It can fund explosive growth, put a company on the startup map, and allow hungry entrepreneurs to eat again. But, being flush with venture capital, especially early on, can force many startups to scale too quickly, only to crash and burn.
So how does a bootstrapped or angel-funded startup compete against companies with millions of dollars in VC financing?
The company I co-founded, AdoTube, became one of the few profitable startups in the VC-heavy online video advertising industry because we were independently financed with a single million dollar round.
The most pressing issue early on is survival and that means generating revenue. With labour being one of the largest costs, staffing decisions should be put under extreme scrutiny.
Whether it's an engineer or administrative staff, we hired only if we absolutely felt that we could not move revenues forward without doing so. Taking this approach, we have developed a broadly-skilled and dedicated team who are interested not in simply cashing out, but in building a real, profitable-growth business.
Raw talent alone isn't enough. Having a team that is hungry for real business success is critical. Since we were working with minimal funds, we offered real stakes in the business as incentive for the team. We have the flexibility of being able to offer a range of compensation packages such as stocks or options, deferred compensation, and higher positions.
Under a VC-funded model, our incentives may as well have been limited to stock options, which are more or less just a sweetener. Stock options alone cannot stand as an effective motivator in the short or long term.
Having full control allows a startup to consider what is beneficial for the company as a whole, since business' interests are aligned with shareholder incentives.
This translates into fast action to take more creative risks in developing new products and services.
All this being said, not going the VC route is for people who can thrive on stress. Always walking a thin line is quite nerve-wracking, especially in the early years.
AdoTube is a long way away from the months when we were pulling our hair out wondering how we'd make payroll. But having soldiered through those months by focusing on long-term growth, we've been duly rewarded with a dynamic and thriving campaign.
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