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Is it wrong to simply want to build a great SMB in the tech world?

by Jason Jones, President

Over the past few years in the startup space, especially the technology industry, companies talk about building the next “Facebook for apps” or “Google for the cloud” — something tailored to catch investor attention — with the intent to get funded, then get acquired or go public.

People who have bought into startup scaling hype have a very poor opinion of bootstrapping. This article from TechCrunch summarizes that critical view:

“The cliché is that it’s not the destination that matters, but the journey.  Sure, maybe in Bullshitistan.  In the sports and business world, it’s all about the outcome.  No one remembers the score, let alone how the teams played the game, they remember who won.”

But how much merit should you assign to Silicon Valley fanfare? One might liken the tech investment machine in the Valley to Disneyland: everything is strategically contrived, scheduled, and designed to keep you on the rails.

Do you really need to follow the Valley model and participate in all of the set-out training programs, bootcamps, pitch events, and conferences that take you away from your company? Or are you better to put your head down and get the work done, and seek funding only when it is effective and best suited to your particular circumstances? At the end of the day what an entrepreneur must always keep at the forefront of his/her mind is what is best for the company.

I like this quote from Paul Orlando’s e-book;

“Startups and investors – need each other. However, investors are more dependent on making good quality investments than startups are on finding funding. Case in point, it is possible – difficult but possible – to bootstrap a startup without taking investment and to run and grow your business for years. Companies like Grasshopper, Clicky, Carbonmade, WooThemes and 37signals have done it. On the other hand, it is not possible to be an investor and not make any investments at all.”

I think it’s time to destigmatize simply building a great SMB with solid revenues, products, and clients.

It may not seem like the sexiest option, but that may be a sign it’s the best route for the majority of businesses. A thoughtfully grown SMB is stable, and can wreak less havoc on an entrepreneur’s life. As it is more sustainable, it is also less susceptible to crashing if and when the tech industry bubble bursts, as it has in the past and some are predicting it will again (and soon). As Paul Orlando said in a recent interview with Tech Cocktail, entrepreneurs, not investors, “are the people who may lose everything if they raise more capital and try to scale massively to take a shot at a big exit.” He said in the same interview that many founders would prefer to have smaller, sustainable startups, but they only admit this privately, since this viewpoint is not attractive to investors.

Building an SMB with a measured, steady approach can teach you aspects of the business that you might not otherwise learn about. Laura Zander wrote in Inc. last year of how organically building her company gave her the time to grow into the responsibilities being an entrepreneur brought. Over a decade later, Laura and her husband still run the company, and it has grown into a multi-million dollar success. They didn’t need to get outside funding to accomplish what they have, and do not plan on seeking any in the future.

In a series published in Pando Daily, Hayden Williams chronicled the hardships of a young entrepreneur self-managing his startup. In the piece called ‘In Lieu of Investors: How We Breathe Down Our Own Necks,’ Williams explains that he and his co-founder have elected to bootstrap their startup to avoid the rapid pace that venture capital brings to companies, many of which are not equipped to handle it. This would have led to jumping ahead and adding features to their product when they should have been concentrating on building a solid framework. While they had not completely shut out the idea of seeking venture capital in the future, they saw the value of taking the time to build out a solid, viable product that they know users can be happy about, instead of hurriedly chasing funding that could have put their business over the top and even possibly down and out. Instead they have utilized their investor network for feedback on their business model, product and for valuable introductions, “rather than a required rung in a startup lifecycle ladder.”

When building a business, especially around an idea that you have developed and kept for so long, the goal shouldn’t be to make an exit that is as quick as lucrative as possible. Rather, you should work towards building a strong, stable, and capable company. The future may bring an opportunity to receive funding, or a need to raise capital, but it shouldn’t be the only target or success metric for your business.

What are your thoughts about ‘shooting for the stars’ versus being a ‘sustainable success’? Are the two mutually exclusive? Is a re-definition needed of what is a success in the tech startup space?

 

CC-License: CC BY

Photo: Markus Spiske / www.temporausch.com