As founders/entrepreneurs, we are constantly asked about our funding approach. How much have you raised? Are you expanding? When can you scale? So much of the perceived “success” of a business depends on whether you are venture backed. In this massive business shift toward funding, we are forgetting about the three things that build a sustainable business: customer, experience/product and culture. While the press headlines and many business leaders focus on promoting how much money they have raised and expansion, I would argue that we need to also focus on the quality of our products and offerings as well as profitability and sustainability. Investors and the media care about growth but that’s just one measure. Customers care about the product or service they are buying and the best experience and value.
While I launched Luminary less than a year ago, a day doesn’t go by when I am not asked “who are your investors?” When I explain that I self-funded, that I want to grow my business with our member [customer] in mind vs. maximizing value for an investor, I often receive many perplexed looks. The follow-up question is always around expansion and when I plan to open our next location. There is a significant amount of romanticism around VC backing and expansion that doesn’t necessarily mean a company is or will be a success.
I have had the opportunity to meet so many incredible founders, many of them women, and a significant number of them are bootstrapping their businesses. According to Visa’s State of Female Entrepreneurship study, 61% of the 650 female small business owners surveyed chose to self-fund, or bootstrap, their own start-up. Many make that choice out of necessity as several stated it was difficult to obtain the funding they needed for their companies. When self-funding, you use your existing finances to fund your small business. Some entrepreneurs use their savings, dip into retirement accounts, and/or use credit cards to get started. However, many wanted to maintain control of their companies, grow responsibly and focus on building a profitable, sustainable business, choosing the path of bootstrapping.
All businesses need to grow and generate revenue, which allows them to reinvest in their teams, product(s), customers and in Luminary’s case, the community. The broken narrative is only focusing on the sexiness of growth accelerated by VC funding. As we think about building successful businesses, we need to focus on getting our business concepts right before scaling and investing in quality over quantity. Rapid expansion doesn’t always deliver growth or success. Funding and expansion for the sake of investors can be bittersweet. Raising money involves countless meetings, events, networking, and pitching. CEOs and founders spend less time on their actual company, their culture or their product/service. Jacqueline De Jesu is the Founder and CEO of Shhhowercap, a multimillion-dollar start-up that is also self-funded. She said “people are generally “extra” impressed with our trajectory being self-funded. It’s uncommon today. Especially for a product company. I do think there is sometimes a biased assumption that we’re self-funded because we couldn’t raise. As opposed to the reality in what has been an intentional decision since day one. One that we’re very proud of.”
Iman Oubou, Founder and CEO of SWAAY, a digital platform for women combining the “best of social networking” with the “best of publishing”, originally raised money to launch her platform, mostly from female angel investors, but it wasn’t an easy journey. The more she talked to VCs the more she doubted herself and the less confident she felt, making the fundraising process extremely challenging. “The current media narrative tends to elevate founders who have raised millions of dollars as the true heroes and positions them as successful, even if their businesses aren’t profitable.” Oubou’s challenging experience of trying to raise money led her to the self-realization that self-funding was the best way to approach her business as a woman, especially if you have passion around your vision. “I never set out just to build a business for the sake of chasing dollars, press recognition or an impressive exit. But there are founders who have raised hundreds of millions of dollars year over year and are still struggling to figure out their revenue model, yet the media continues to celebrate them as what business success looks like.”
The start-ups dominating the news headlines are growing fast, and a lot of that revolves around the need to justify the next round of investment. There is rarely any emphasis on being profitable or the customer impact. We’ve seen the recent examples including Uber, WeWork, Slack and more forcing the ‘growth at any cost’ mindset. Oubou mentioned that “after four years of being in the fundraising rat race, I’ve finally come to terms with the fact that I want to bootstrap my way into building an authentic empire, on my own terms. Instead of spending hours pitching investors who have a hard time seeing a female founder as a viable leader. I’d rather put that time and effort into growing our revenue and getting creative on how we can continue to add value and grow. While bootstrapping might not be the “sexy” media story for many, in my view it is the most impressive way to build a successful and sustainable empire, and I think that narrative should be celebrated more by the media.”
We know that it is much more difficult for women to obtain VC funding with roughly 2% of venture dollars going to female founders. However, there are an increased number of angel and venture vehicles like Female Founder Fund, The Helm, SoGal and New Voices Fund to name a few, that female founders can turn to. Every founder cannot bootstrap nor turn to investors, but there are many resources and tools designed for female founders to support their businesses. WE NYC (Women Entrepreneurs NYC) is an initiative based out of the New York City Department of Small Business Services that is dedicated to helping women start and grow their businesses. It’s the first of its kind and with over 200,000 female entrepreneurs in New York City, WE NYC is leading the charge.
“We need to redefine success and look at funding with new eyes, understanding that not all businesses are a good fit for outside investment,” said Diana Franco, Executive Director of Launch Services for the Department of Small Business Services. “At WE NYC we challenge the status quo by teaching alternative sources of funding through our WE Master Money programs. To succeed, you have to think out of the box. You have to understand the options to navigate that space.” With female founders starting businesses at 4.8 times the national average, crowdfunding has become an alternative source of raising cash. According to a 2017 crowdfunding report from PwC, women do substantially better on crowdfunding platforms than their male counterparts. Platforms like iFundWomen, a crowdfunding platform for women-led startups and small businesses is the only crowdfunding ecosystem that’s specifically designed for early-stage female entrepreneurs.
Co-Founders Gabi Koshgarian and Catherine Wang of Blankbox, a direct-to-consumer brand providing ready to gift custom boxes, have bootstrapped their business since launching over a year ago. “There is a lot of the buzz, both in the press and in general, around companies who have raised money. It’s led to this mentality [and one that we as founders fight against daily ourselves] that you need to raise outside money to start a company.” The mentality of needing to raise money to make money likely becomes a self-imposed barrier to entry to many hopeful founders. “It’s important to show people that it’s okay to start small while you test your idea in the market. It’s also not black or white. You can self-fund for x amount of time, and then go out and raise money or take on a larger loan when the time is right.”
Like many self-funded founders, Koshgarian and Wang find it hard to get their story out in the press. “Getting press is hard when you’re self-funded. We’ve been bootstrapping for a while and sending carefully crafted, personalized notes to editors with an extremely low response rate. Unless you’re well connected and have press relationships when you launch or have ‘buzz’ because of how much money you’ve raised, it’s very difficult for anyone to cover your story never mind your product.” Founders also need to stop comparing themselves to other brands with funding because it’s not an equal comparison. “We get company envy at funded companies’ gorgeous new marketing campaigns and Instagram ads that run 24/7, but we always take a step back and remember that we’ll get there,” according to Koshgarian.
The self-funding story is important to tell. Hillary France, Founder and CEO of Brand Assembly, thinks all stories need to be told – for all of us who are founders, creators and entrepreneurs – whatever story that story may be. France says, “I think there’s a misperception among many people that if you self-fund, it’s because you couldn’t raise outside money; so I think it’s important for people to understand that in many cases – certainly mine – self-funding was a deliberate and intentional choice.” We have to find ways to support all founders and whatever funding path feels right to them. France also cautions future generations of founders not to be discouraged, “that we seem to be living in the age of thinking that raising money is the only way to be successful, as well as the heightened coverage of the ‘celeb-preneur.”
Amongst the female founders I speak to daily, they all suggest finding a relevant network of other female founders who are self-funded. This network provides an effective sounding board, a community with a similar perspective, shared resources and advice. Together we can promote each other’s brands and make introductions which are critical as you build your business and your brand. De Jesu says, “I personally find it important to remind entrepreneurs that good ideas are what can launch companies. It levels the playing field. Venture funding or the amount you raise is not what defines your company — or even your personal success. It’s a very specific way to grow. Everyone’s needs are different, and, only you can decide what’s best for you, your team, and your future. It’s important to remember there are many impactful ways to launch, build, and grow.”
Business leaders need to re-focus to optimize not just for the investor but for the customers we serve and the broader impact we’re making. Focusing on who we serve first is critical not only to building a sustainable company but also a sustainable culture within your organization. If the majority of female-founded start-ups are bootstrapping their business to grow at their own pace, without external and VC pressures, where are those stories in the press? These stories need to be told too because they can influence founders of all genders.