By Chris Mackey
The way I see it, if you aren’t prepared to go for broke, then what the hell are you doing starting a business? Launching a company is risky. It’s expensive, costing you tons of time and money. Startups fail every day and no matter how original your idea is, there are a million factors outside your control that could prevent your business from taking off.
At 27, I decided to launch my own business in the investment management technology space. I knew early on that I wasn’t prepared to risk other people’s money – not institutional investors’ and especially not friends’ and family’s hard-earned cash. I decided that I was going to make it on my own, or not at all. Here is what I learned from building and bootstrapping a successful tech startup:
You need to go all in: I funded our early days using my limited savings. I cashed in my 401(k), sublet my 1-bedroom apartment, and moved into what could have been mistaken for a rundown frat house, but for 40% of the rent I was paying previously. The place was nowhere near ready for tenants. I lived without electricity, heat, or water for weeks. In January. In Boston. The point is – I didn’t care –all that mattered was getting the business off the ground.
Timing is everything: There were other research management systems in the market that had been successful, yet I was confident we could build a better mousetrap. We did our research – A LOT of research - and identified the gaps we felt we could fill. There was an inevitable shift toward web-based applications on the horizon, and luckily for us, investment management firms were late to the party. That, along with the fact that hedge funds were shaken from a sweeping insider trading investigation, meant they were reassigning compliance controls and internal tools.
These market indicators helped to shape our initial prototype. I had a good feeling the timing was right.
Find – and Reward – the Right Partners: Hire smart. Our goal as a company is to maximize profits at all costs, and a big part of that is hiring and retaining the best available talent. Even the greatest idea in the world needs to be backed by people capable of executing on your vision. And once you find the right team, bend over backwards to keep them happy. It pays to treat your employees well. Compensate them handsomely before you can afford to pay yourself - show them their value and worth. I am proud to say we have never lost a core member of our team in 6+ years.
Stay Lean: Every cent matters when you are starting a business. Public perception seems to be that every startup has the ‘cool factor’ – the office ping pong table or fridges stocked with craft beer. Not true. For us, a major perk was buying a couch. As a startup on a budget, we made sure to critically evaluate each dollar spent. If it isn’t taking you one step closer to your end goal – don’t do it.
Put your money where your mouth is: With limited resources, we had enough cash to build an initial prototype that I was proud of. But without outside capital, we had to land clients –quickly – or we were dead. Our cash balance quickly approached zero, yet I still refused to consider investor options. The way I saw it, we had built a product we were all confident in. If I couldn’t sell prospects on the product itself or the vision for the company, then either the product wasn’t as great as I thought, or I wasn’t a good enough salesman. Either way, we wouldn’t have deserved to be in business. We finished our first year in the black, and have maintained healthy profitability ever since.
Don’t Buy the Hype: Raising money is celebrated in the media. Headlines constantly scream of a new firm that raised capital, whether it’s a seed round, bridge or Series A – the media consistently applauds fundraising efforts. This can be a major distraction, if you allow it to be. Bringing in outside investors can deter away from profitability and dilute equity. Choose to ignore the headlines and fluff, and focus on your clients.
It IS Personal. Embrace it: You always hear “It’s not personal, it’s business.” Wrong. Our business is personal, and in my opinion that is what gives us an edge in a competitive market. We work hard to foster an environment where employees are all in, and 100% committed to achieving our goals for the business. In the words of the infallible Al Pacino: “It is the guy who is willing to die, who is going to win that inch.” And for the employees that don’t want to be there? Let them leave.
In the startup world, the hustle never ends…Things are just a little more personal when you aren’t playing with other people’s money.
MackeyRMS ™ is the leading provider of SaaS-based research management software for investment professionals. Highly automated and ultra-portable, MackeyRMS works with users’ existing devices and applications to aggregate and organize research content. For more information, please visit www.mackeyrms.com.