Growing a startup into a successful business is a journey full of tough decisions, and one of them is deciding whether you should bootstrap your business, or get funding.
This was a topic of discussion during a panel held following the Sydney premier of The New Hustle. The panelists were SafetyCulture founder Luke Anear, Vinomofo co-founders Justin Dry and Andre Eikmeier, and the co-founders of Canva, Mel Perkins and Cliff Obrecht.
Each business had different experiences and different points of view on the best approach.
Here’s what they had to say.
CANVA: Don’t raise unless you know how you’re going to spend the money
Perkins has the experience of both bootstrapping her first business, Fusion Books, and fundraising for her current business, Canva.
She said while bootstrapping taught her valuable lessons in how to make and spend money the right way, having funding for Canva was great — but it’s important that you know how you’re going to spend the funds before you decide to raise.
“[If you don’t] it means that you’re going to increase your burn and you’re probably going to go out of business pretty quickly,” she said.
“I feel like we were very lucky, actually having those five years of really figuring out exactly what it was that we’re going to do. When we actually raised money, we knew how we were going to spend it and yes, all those graphs look nice and pretty and pointing up to the right, but I think it was only because of those five years of figuring out exactly how we were going to spend the money.
“Be careful not to raise money prematurely because it is a ticking time bomb. You will increase your expenditure and if you haven’t got that exact knowledge of how you’re going to execute and the exact knowledge of your market then you’re probably going to be out of business much more prematurely than you need to be.”
In 2015, Canva closed a $US15 million ($21 million) capital raising, taking total funds raised to $27.6 million.
The round was led by Hollywood stars Woody Harrelson and Owen Wilson, and backed by existing investors such as Blackbird Ventures, Matrix Partners, and Vayner Capital.
SAFETYCULTURE: It’s a chance to broaden your network
Anear, also the executive producer behind The New Hustle, says it was a different experience for him than for Perkins.
He admitted he didn’t “know all the answers” and so reached out “to get help from a broader network”.
“Particularly in Townsville, where the startup community out there is not quite the epicentre of the world… to start hearing different ways of solving problems and then meeting more people who were able to help us on that journey was incredibly valuable.”
Anear started SafetyCulture from his garage with a small team. When he hired them, he asked: “Do you have a laptop? Can you code? You got a job.”
“We’ve raised the bar a bit since then,” he joked.
Last year Safetyculture raised $30 million, led by international venture capital firm Index Ventures. Prior to that, other investors have included Blackbird Ventures and Atlassian’s Scott Farquhar.
“I couldn’t think where we’d be if we continued the original path that had been set out,” said Anear. “It completely changed the trajectory of the company.”
VINOMOFO: Delay raising as long as you can
These are the words of Dry, who isn’t necessary opposed to raising funds, although acknowledges that as soon as you do, you are giving away a portion of your company.
“First, I think you need to delay raising as long as you can, until it’s necessary, because you give less of your company away obviously,” he said.
“Second, we did it because we needed to scale up so we could compete with the big guys.”
Dry rehashed the story about selling 70% of their business to Catch of the Day, and then realising it was a complete disaster.
Dry remembers it being “a really awkward conversation” when they told the majority owner that they wanted out. While there was some “initial shock”, the pair managed to buy it back about three or four months later.
“That was like the most exciting thing ever but then we realised we had to pay for shit again,” he said jokingly.
When they made their first sale following the buyback, the pair celebrated.
Dry said, “It was like ‘F**k we’re back, independence baby!’ And then we realised we needed to sell another 20,000 before we could afford the wages this week.
“Amazing journey, but yeah, challenged.”
In April last year Vinomofo raised $25 million from Blue Sky Ventures.
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