Ask HN: Bootstrapped business is good but slow growth. Should I raise money?
hi all. I run a 100% bootstrapped SAAS business and I am solo. Part time right now and I have a fulltime job as well. I literally built it on top of wordpress (dont't ask) to validate the idea and before I realize, I have 35 payinng customers and revenue averaging $7000/month. Cost is about $1500 for servers and ocassional freelancer work.
Here is the issue. The application is not a very simple thing and a lot of potential clients want demo or discuss things over phone. I am getting a lot of interest from potential clients but being solo, I don't have much time to entertain all queries. So in short, I am growing but very slow and not able to yet quit my fulltime job because I have high family expenses (2 kids,mortgage etc). And just to confirm, the profits from this business is not yet enough for me to do it fulltime and support my family.
I have a potential Angel investor who I could talk to and may be get some funding so that I could quit my job (which i really want to quit) and do this fulltime ? That way, I could scale it faster and may be hire an employee or two as well. I also have plans to revamp the entire app by getting rid of wordpress and building it properly now that I have validated the idea.
Technically, the platform being wordpress is very limiting and I have plans to revamp it but again, need a good team for that.
What would you do ? I know everyone's situation is different but really want some advice here.
Published in 2014, this chronicle by @newpreneur details the mechanics of building a profitable, self-funded business without venture backing.
The community focused on B2B customer acquisition channels, cold email vs SEO distribution, and balancing full-time employment with side-project development.
Gut feeling: that's a high revenue for one person. It can be easy to take for granted if the growth took a long time. But just wanted to offer another data point, that my old partner and I only managed about $1500 a month on our best month selling shareware games 15 years ago (this was before app stores, we were high on sites like download.com, but never saw anything approaching exponential growth).
It’s straightforward to make more than that consulting. The catch is that consulting businesses generally have no intrinsic value. Their value is in the workers, so if there are N people and one of them leaves, they’re worth about 1/N less. In other words, the have less resale value than product businesses.
So I would say, if you want your business to be worth something, consider streamlining it to the point where it no longer needs you. The catch to that is that it isn’t something you do while you are still working on your minimum viable product (MVP). So ask yourself:
1) are you still getting established? - then bootstrap, nobody will lend you money other than credit card companies
2) or are you at a point where you have some breathing room? - consider funding from family and friends because even long tail decline can pay them back
3) or is everything in place to the point where you are ready for exponential growth? - raise big money
I started writing a big spiel about brick and mortar stores and getting loans in exchange for a stake in the business but it wasn’t something that couldn’t be gleaned from watching a few episodes of Shark Tank.
The way I see it is, you’re probably still a consultancy, still in phase 1, but on the threshold of phase 2. But congats, because most people never make it that far. So are you familiar enough with promotion and branding to get new business on your own? Or can you find a partner somewhere who is as established as you in some way (having either skills or cash), who will help you rather than hinder you? Or do you have a family friend who has experience running a business and more importantly, has the cash you get you to phase 2 in a short amount of time?
Concretely, it sounds like you need money so you can give your full attention to refactoring and hiring for growth, and you know an angel investor. Don’t hold onto the job. But don’t go and borrow more money than you need either. You’re in a unique position where you could borrow 6 months or a year’s wages without having to work for and save that money yourself (which takes 10 times longer - so if you wanted to save $10,000, you would have to earn $100,000, which most people don’t have the means to do, and that’s the actual thing that stops people from starting their own businesses, not dedication or talent or the things that hackers tell themselves to feel special). As a general rule, a bank might lend you what you have in savings. But an angel investor might lend you a lot more for some percentage of the business. A partner would want half, but maybe there’s a sweet spot where you could borrow more and give up less, because you have enough cashflow to survive on your own without the money. I made the choice to give up my job and go it alone a couple of years ago, but I don’t have 2 kids to support, and now it’s not so much about the money as missing the interaction with smart people. So now ironically having a great team and a sustainable income would be more attractive to me than any amount of money, because the sky would be the limit. Maybe thinking about what you really want, and accepting that you’re being given a special opportunity rather than merely weighing risks, will help you decide how to proceed. Good luck!
Why not hire and train a part time person (or friend) that can help cover demo's and help you grow a little faster and stay bootstrapped. It would mean that you would need to add more customers before you can go full time but it is a way to stay bootstrapped and not take others money. You could even pay this person per lead closure, so for every client they get signed up you pay them $200 (or $400 whatever).
You could also work to simplify/automate the on-boarding, spend some of your monthly revenue on creating some videos that cover the features/questions people seem to ask the most about. You can make a few videos, 45 seconds or less, and have those on the site for users to view without registering. Then record a full demo that is say 5-10 minutes and if someone registers for more information then send them a link to that video and then follow up with them. You may help shorten your need to be involved in every sale, and decrease on-boarding time. This doesn't mean you can necessarily make a sale without jumping on the phone, but it does mean you may be able to minimize those conversations more and therefore make them more scalable and even possibly easier for you to train others to help you close deals.
In the end, raising money takes way more time and effort than you initially think, and even with friendly investors it can change your ability to go the direction you want. Lastly, remember a lot of investors try and minimize founder salaries, and if you need 10-14k a month to survive then you may struggle to find an investor that will commit when 85% of his investment is just paying for you. If you are thinking you just need 50k to make it for 3-5 months, you might be able to get that more through friends/family/bank to help bridge the gap until you get more signups.
Not sure if you're talking about scaling to a $10MM exit or $10MM in annual revenue or what exactly in 7-10 years, but that sounds to me like too little too long for a knowledgeable SaaS investor to invest in - they're looking for something that has the potential to be at least an order of magnitude larger.
That suggests to me that either a) you're not going to be able to raise in the end, which is bad because you're wasting time, or b) you are going to be able to raise but only from unsophisticated investors with unrealistic expectations, which is a hell of a lot worse.
It would be a real shame to give up a lot of control and attach yourself permanently to unsophisticated investors with unrealistic expectations - just so you can quit your job a few months sooner.
If I were you, and if I really thought my business' potential was $10MM in revenue in 7-10 years, I'd gut it out and do what I needed to in order to continue to bootstrap until I could safely quit. You've got the potential for a great personal outcome - if you can just keep it personal.
I wouldn't take funding . . . stay bootstrapped . . . sounds like you're growing things nicely . . .
You're making enough you could hire an assistant to handle some of the support, inquiries, billing/accounting so you can focus on demo's and growing . . . support would probably be the first thing to outsource . . . setup a google doc outlining typical questions/responses . . . so it's pretty straight forward and have them send something more complex on to you to handle . . .
That will free up some time for demos, etc.
You might get a bump from conversion optimization, reducing churn, etc . . .
Could you go to 4 days per week at your day job . . .
Start doing one demo call over lunch a few times per week . . .
I think there are lots of less expensive ways to gain more time/revenue vs. losing equity.
Good luck scaling your SaaS.
If it were me I would rather be bootstrapped but take a little longer to get there. To me there's no point in swapping a boss for an investor.
I see you mentioned that you already have videos & training materials for users. I would start to document how you do the onboarding in person so you can teach it to someone else. Don't underestimate the value of high-touch sales. It shows that it's working for you.
With you currently having a job, you could invest your current income into rebuilding a new (non-WordPress) version. If your current version is on WP - do you really need a team to create your new version - or just someone contracted for a few months & then on retainer.
Once the new version is up to the same feature set as the current version - migrate users over. Then pour your income into streamlining your business, hiring employees etc.