In today’s episode, Melissa sits down for a (virtual) drink with Greg Head, Founder of the startup consultancy Scaling Point and Gregslist.com, a curated list of local software companies in 8 different cities. After Melissa pours her cream soda and Greg his Americano, Greg shares his story and how he landed in the startup world. He began working for a startup which actually became the fastest growing companies in the U.S. He was very lucky to happen into the field when the market was much less competitive and everything was new. In the early days of his career, he helped grow two software companies to $100 million in revenue.
Next, Greg shares how his experience running a VC funded company in the past has given him the experience he has now. These days, we all know of VC founded companies who aren’t achieving exponential growth. Though there will always be funding available, it is crucial that founders invest their own time and efforts into their idea before they begin seeking it out. So, what don’t they tell you about raising VC funding? The first thing founders should know is that raising capital is not easy, especially right now. You will typically need to prove revenue and customer attraction to be able to raise your first round of funding, unless you are a celebrity or well known founder already. Additionally, if you don’t double your growth rate every year, you likely won’t be able to raise your next round. Your three customers become the customers themselves, your employees and your VCs. Lastly, when a portion of your company is sold to VCs, those VC get their very own preferred shares on their own terms. Really, this means that they typically end up with the largest cut of the company’s sale price, leaving founders with next to nothing.
Even in the most successful situations, most founders, Greg explains, only walk away with 5-10% of their company. Thai means that the amount founders make by selling their VC funded companies is smaller than what is made by practical founders who did it without institutional funding. Those who raise all the funding themselves get to walk away with the entire prize after selling the company. Melissa adds that it is typically really difficult to find someone to buy your company in the first place.
As someone who has had thousands of conversations with founders to date, Greg shares what he has found to be common attributes of the most practical, bootstrapped founders. All founders can agree that they need funding, but that it is difficult to find. Practical founders are typically very resourceful and savvy about their customer base, competition and product market fit. The average founder is not prepared to invest their years and savings into the journey. Finding a business yourself is hard and requires lots and lots of work. However, working for VCs is even more difficult as it means you are working endlessly on someone else’s timeline.
For any founders listening who need funding but don’t want to go the VC route, Greg offers his best advice. Firstly, don’t quit your day job just yet. Scrap something to prove your concept as soon as possible. Secondly, prove to the world that your product is something people will pay for. Founders who are burning through their savings and have no promises of funding end up running on pure survival mode. Before wrapping up, Greg shares about his “why” - the reason he does what he does. The software world he lives in, he shares, is not actually about the software at all. It is really about the founders who make them possible. Investing in software companies and their founders is Greg’s way of creating a positive impact in the world. He parts with a few final words of wisdom for bootstrapped founders: you will probably need less funding than you think.
0:55 - Welcome to this episode, in which host Melissa interviews Greg Heard.
4:16 - Greg’s career journey thus far.
10:10 - How Greg’s previous experience running a VC funded company helped to prepare him for his current role.
17:15 - What they don’t tell you about VC funding.
33:20 - The VC Industrial Complex
35:15 - Benefits of organic fundraising over VC funding.
36:35 - Thus unique attributes of practical founders.
43:49 - Advice for founders in need of funding to avoid VCs.
48:15 - Greg shares his “why”.
52:05 - Greg’s final words of wisdom for listeners.
Welcome to the ProfitLed podcast, where we discover proven growth strategies for bootstrapped entrepreneurs from the people who have done it before to help you accelerate your business! The ProfitLed podcast is brought to you by eWebinar, the leading automated webinar tool, and hosted by eWebinar Cofounder and CEO, Melissa Kwan.
ProfitLed is forum for the unsung heroes of SaaS, the founders and others behind the bootstrapped startups who are creative and resourceful enough to forge a pathway to success. Here’s where they get to share everything they learned along the way, so you can benefit from their expertise and find success in your ventures, too!
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