Fund your business—without pitching a VC

The venture capital route is not the only way. Perhaps your next big win is waiting for you in an enterprise marketplace

man holding money with growth
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There’s a narrative shaping up from some key voices in Silicon Valley who are pointing to venture capital as the modern-day equivalent of indentured servitude. We’ve all seen the effects: seed funding and Series A rounds leading to enormous pressure to show user acquisition, exponential growth, and a myopic focus on revenue rather than profit. The lure of a piece of the next Facebook is used to justify insincere growth tactics and 80-hour work weeks, leading to burnout and rapid attrition. Worse, it’s often to the detriment of employees’ physical and mental well-being.

When considering how to turn your great idea into the next unicorn, you probably think the only option is to find some seed funding, quickly hire a team, build your minimum viable product, and kickstart sales and marketing to show fast customer traction. Then use that momentum to get VC funding, invest in growth, and rinse and repeat until you have a billion-dollar valuation. Exciting, right? This tried-and-true formula forms the basis of both fulfilled and destroyed dreams in Silicon Valley—the latter being the most common. I want to offer an alternative.

VC funding: a cautionary tale

More people are beginning to recognize that taking outside funding could be an unhealthy choice in the long run. Dissenters include David Hansson, a founder of Ruby on Rails and founder and CTO of Basecamp, which isn’t out to be the next Google but rather to create sustainable jobs for people who are mission-driven yet also value time with their families. Phil Libbin, cofounder and former CEO of Evernote, recently championed building strong products over pressure-cooker companies. And Eric Paley, himself a VC, cautions against the enormous pressure associated with funding, noting that in his experience, “VC kills more startups than slow customer adoption, technical debt, and cofounder infighting—combined.”

The primary constraint for success tends not to be great ideas but rather making a product that appeals to your customers. Entrepreneurs rarely get this right out of the gate. It requires iteration. The dilemma is balancing iteration with the pressure of needing big sales to pay for your engineering team and, more significantly, the sales team that is going to get you in front of companies to buy your products.

The good news is there’s a way to bootstrap and grow without having to raise funding to hire a huge sales organization. My challenge to product innovators: Forget building the sales side. Instead, look for successful companies and piggyback on their sales channels.

Piggyback by building on an existing platform

There are many successful enterprise software companies that allow you as a developer to build your products on their platform and, more important, integrate with their successful product offerings. The ecosystem marketplace approach is one I am very familiar with both in my role at Atlassian, heading the ecosystem business, as well as in the past running the eBay developer ecosystem. Then and now, I operate in a world created entirely to enable businesses to achieve economic independence through a vibrant marketplace.

Jira, one of my employer Atlassian’s signature products, has more than 1,500 apps built by software developers who saw an opportunity to sell into the Jira customer base. Atlassian has more than 100,000 global corporate customers—imagine the investment required to build a sales team to reach 100,000 customers, let alone establishing a global sales team. Why not piggyback? In addition to Atlassian’s Marketplace, other successful enterprise platforms and marketplaces have made millionaires out of their ecosystem developers, including Salesforce’s AppExchange and Amazon Web Service’s Marketplace, and more companies are catching on. Getting an early mover advantage in those ecosystems is a great way to grow your business without having to raise a bunch of money to get your business kickstarted.

Choosing your path forward

As you graduate from your idea and a laptop to a multi-million-dollar-plus revenue business, you now have the flexibility to decide how you want to proceed. As a result, you need to ask yourself, “How much is enough?” Are you satisfied building a $10 million or $20 million business, or do you want to go for the billion-dollar club? It’s not always an either/or—you can start small, then go big—but going big means that you’ll need help. Even companies that have been profitable since their first year, like my employer Atlassian, eventually take in venture funding. Rather than using capital to grow or scale the company, in some cases funding brings the skills and network to help bring the company public, and in others it’s a way to create immediate value for the employees.

How big you choose to go is the defining moment for entrepreneurs. You have big dreams which can easily be redirected if you are not careful about how you get VC funding. You might get left behind by competition if you don’t go big early, but you may need to take your business in a path not consistent with your goals if you do take money.

Each path has its own challenges and opportunities. The VC route is not the only way—perhaps your next big win is waiting for you in an enterprise marketplace. What ultimately matters is that you have the options you need to move your business forward.

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