With venture capital hitting new records in Australia, it’s easy to forget that not all startups find funding.
According to KPMG, there’s over $850 million in venture capital floating around Australia. But that hasn’t made it easier to lure in funding. In fact, from our perspective, most of this money is going towards later-stage funding for established companies.
The latest Startup Muster data shows that only one third of all startups in Australia have secured funding. Meanwhile, in the US, there’s an increasing movement of founders turning away from VC and making their business work without the capital boost.
We never intended to go down this path with Shootsta, however as we grew the company we found that the search for funding was taking away valuable time growing the business, and we had a model that allowed us to scale without needing a cash injection.
Through continuing to grow the business, we learned a thing or two about bootstrapping. Shootsta now has over 70 staff and offices in five countries, only raising $1 million from an ASX-listed company, AdCorp, two years ago.
This style of growing a business isn’t for everyone. In fact – as I’ll explain – it can be more risky than taking VC if you’re in a competitive market.
To break away from the obvious and dig into the real meat of what we’ve learned, we’re going to assume you have a business model that’s scalable and also profitable (without needing to hit a critical mass of customers or users). This is crucial, as we understand that not all models fit these criteria.
But here are the three best lessons we learned:
1. Consider alternative funding partners
Venture capital is a significant source of funding for the startup sector, but they aren’t the only ones who will back emerging companies.
There are plenty of corporates and private investors who are willing to consider investing into startups. Case in point: within the past month, Salesforce, Cisco, Equinix and Zoho all launched their own fund within Australia.
As I mentioned, we ended up going down the corporate investor route. I had connections at Adcorp through previous business relations, so approaching them with a new concept was easy.
However, as with any investment, it did take quite a while to convince them this was a good investment. I’m pleased to report they’re extremely happy now.
My biggest tip in this space would be the old adage of not putting all your eggs in one basket. We had a number of interested parties before we closed the round with AdCorp, and it was this pressure that got the deal over the line.
2. Build a good network of advisors and mentors
One perk of a VC is they give you access to their network and the resources at their disposal. If you choose to proceed with a bootstrapping approach, you need to consider this as a blind spot of your business and excel at networking to compensate.
You will need advice as you grow your business.Mentors and advisors have been a key part of Shootsta’s growth story, and personally, a key part of my entrepreneurial journey.
I once heard that: “your income will be the average of the 10 people you spend the most time with”. I’m not sure if that quote is mathematically accurate. One thing I do know, is my mentors and advisors have given me a greater perspective and raised my belief in what I can achieve.
The single most important piece of advice I could give is to define the kind of person you want to become, then work extremely hard at networking until you find the person that best fits your vision. Once you’ve found them it’s quite simple – have the confidence to buy them a coffee and pick their brains.
3. Consider your market before ruling out VC
Sometimes, an extra boost of funding and the support from an industry partner can give you the edge you need to succeed.
Before you disregard the value of VC, consider how competitive and tight your market is. Will someone else secure funding and fast follow your model? Are you in an emerging market that you need to capture as quickly as possible to succeed?
This is the kind of edge a good VC can give a company. Raising funds does also get easier over time, as you can leverage further warm intros from your existing funding partners to get an easier foot in the door with others.
Shootsta are certainly not ruling out VC funding in the future, we’re simply enjoying the freedom of being able to steer the ship ourselves, with clients’ needs at the heart of our decisions. Fortunately for us, our model affords us this freedom.