Dealing with unsolicited venture capital inquires is quickly becoming my number one task. I'm getting between 5-10 emails or phone calls from VC's and private equity firms on a weekly basis. Is this a sign that the market is about to explode with new competitors or is it a sign that 4+ years of work is starting to pay off? Are others in the cloud computing space having similar experiences?
As an entrepreneur I've alway prided myself on my ability to bootstrap our business without any help from banks or investors. Because of a previously failed start up my credit was so bad I couldn't get any sort of credit and was forced to build a money making, debt free, profitable business.
Now as I see all my competition getting millions of dollars in VC, I'm starting to think it may be time to investigate some of these inquires more closely. But I'm torn, by taking VC, will I lose my identity as a bootstrapped entrepreneur? Or will the opportunity that a VC's money give us, offset my entrepreneurs ego by making our company the next big thing? Do I want to be rich and successful or am I happy running my business under my own terms? Can I have both, or is this an illusion?
I suppose I need to ask why do I need VC? I am looking to hire 100 people, probably not, am I looking to exit in 12 -18 months, probably not, do i need more inside connections? Probably not. Do I want a board of directors breathing down my neck, Certainly not. Do i want to grow my business, Yes, do I want to do more marketing, Yes, do I want to hire the best and the brightest, Yes, Am I looking to maximize the value of my company? Yes. Do I want my company to last, Yes!
I need to ask myself whether after 5 years of being my own boss, do I sell out to VC's, in order to take my company to the next step or am I happy being a small but profitable player while my competitors become huge corporations and or sell out for millions.
I'll keep you posted.
Friday, May 30, 2008
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5 comments:
Having bootstrapped our business thus far on the back of our consulting I see no reason why we should throw away all that hard work and allow someone else to dictate the direction of our business and how to run it.
It's independent entrepreneurial spirit that has gotten us this far. Let's not neuter ourselves by taking money that we don't necessarily need.
Ruv, I hope you can find a way to have your cake and eat it to. Good luck.
Ruv,
I think you have to take your success of bootstrapping your biz and quantify it as value of your biz. The fact that your in a leadership circle in one of the hottest tech areas also adds to the current value of your business. My point is, that all these assets help you to have your cake and eat it too. For example, if you could argue your company is worth $15M, then you can sell a minority share e.g. 25% of your business for $5M in cash to help you grow your business. True you'll need a board and true things will change, but you will still control the business. Aside from getting as high a valuation as possible (read keep getting those VC calls ;-) you can also bring in multiple investors to help maintain control. VCs usually like to invest with others anyway - and by choosing them well you can get complimentary value add and they can also temper each other - all working to your advantage.
IMHO, you're in a business that is getting very competitive very quickly. You simply need $$ to grow faster, smarter, better. Otherwise you'll quickly loose your excellent lead spot. As it is, RightScale gets way more publicity than you, for example. IMHO, the question is not whether to take money, but whose money to take.
Lots of luck
Tross
If you could use some cash injection to grow responsibly to stay competitive with your competition that is accepting cash infusions why not try a new approach like to raise money the open source way and have the community participate in your growth and finance it that way.
The world is changing and so are concepts all over the place. Who says people need to restrict themselves to the way money was provided to companies in the old days. I am sure a new concept could be developed without selling out your soul to the sharks.
AR
Look at Google's IPO - they changed the rules completely. Of course, Google was already extremely well known and being public the investment laws are very different. You can't really get yourselves public without a fair bit of cash - no matter how you slice it. I wonder if you could raise money the old fashion way to do a reverse take over of a public company. Then you'd be able to do some kind of "open" public offering ;-).
IMHO, it's much easier to work with the sharks - they're not all evil and they can help. Maybe the Maple Leaf Angels is a good start?
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