Opinion

Weathering the storm: How startups can survive without ongoing investments

7 min read

17 December 2015

The current popular startup narrative is all about hopping from one round of funding to the next, pursuing massive growth or exploding in a spectacular fireball if you don’t make it in time. One startup owner reveals how he weathered the storm when funding wasn't available.

However, as an industry, sometimes you have to get real and face the facts. Sometimes, funding is not a one-size-fits-all solution. Sometimes the right course of action is to break the cycle and catch your breath.

Rather than putting you on a path to mediocrity, taking this action can teach some important lessons, and set you up for even more exciting growth in the long term.

The tough decision

Four years ago, Pusher took $1m of funding. We had early growth, but were in a product category that wasn’t well understood, and with several approaches seemingly doing well. We were also Europeans who (shockingly) didn’t want to move to The Valley.

As a result, the options for Series A in 2012 just didn’t work for us. Let me rephrase that: we couldn’t get more funding. We had to make a choice.

We believed in what we were doing and knew that our customers loved the product. But, given Wenger’s “growth vs profitability” spectrum, we made a conscious decision to pursue the latter.

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Problems money can’t solve

They say money can’t buy you happiness. It also can’t buy you the right timing for your startup to take off.

It’s easy to quickly find your most well-known customers are early adopters, while mature businesses further down the technology adoption curve are slow to get on board.

In our case, the idea of having data pushed to open applications in real time seemed cool, but there was no real understanding of the best method, or whether a few kids in a startup could be trusted with such important infrastructure.

Having tons of cash doesn’t immediately fix these issues. If you believe your speciality is the future, you have to trust that time will help your market become educated. The question is, can you survive, continue to sell and thrive while that continues?

As a pretty lean operation, it’s easier than ever to punch above your weight without costing the earth. Outside the crazy salary nexus of San Francisco, burn rate may be more forgiving than you expect.

If you pay close attention to the numbers, in Paul Graham’s immortal words, you can build a business that is “default alive”. And going through that experience will shape how you run the company forever.

Continue reading on the next page for a look at how to survive and coming out on the other side.

Image: Shutterstock

How to survive

Nothing focuses you like constraint and, by contrast, it’s much easier to paper over the cracks and not tackle systemic issues when you’ve got a fat bank account.

You have to be extremely disciplined with scaling so that the lessons learned can make it to future iterations of the company’s operating system. By getting playbook and operations working well with a small team, you may actually avoid many issues that are only compounded as you grow.

With SaaS tools, lean startup operating methods and careful strategy, seed money can go an awfully long way these days. I suspect there are more companies out there beating a path to significant traction with reasonable capital than is often talked about.

The price you pay

It’s important to be clear: though Pusher came out stronger, this route is not without painful sacrifice.

With limited resources and a growing customer-base, it’s amazing what proportion of time and energy can be expended simply to keep moving. As a founder who loves building stuff, the impact on this on speed of product development can become seriously frustrating

It becomes clear that you have to ignore noise from competitors and really focus on elements you know customers value, like stability, at the price of some shinier stuff. As a consequence, you’ll end up with a focused core that may well prepare you for the future in ways they simply aren’t.

The other big sacrifice is that technology products have a lifespan. By continuing to run with the core, you risk neglecting engagement with emerging opportunities before the market moves on. There’s nothing worse than the thought that you could effectively be killed by the next you.

Coming out the other side

If you can weather the storm, you end up with almost infinite runway to experiment with new ideas and create new opportunities for growth. And investment is not a one time opportunity. There’s no greater lure than a company with revenue and customers on its books.

For me, that’s the kind of optionality money can’t buy.

But here’s our advice: work out where you stand on this issue early.

Some crave the adventure and the risk, or want to get out quickly. Others embrace the mission to impact as many people as possible with cool technology, even if that takes time.

The price you pay, is up to you.

Max Williams is the CEO of real-time technology company Pusher.