Alex Theuma, Founder and CEO of SaaStock, sat down to interview Bridget Harris, Founder and CEO of YouCanBookMe at SaaSOpen on the lessons she’s learned bootstrapping her company to over $5m ARR.
You’ll want to have your pen ready to take notes on this one – Bridget candidly shares six lessons every bootstrapped founder should know.
Lesson One: The Road to $5m ARR and 20k Customers (How Long it Really Takes)
Bridget: The question about timing is intrinsically connected to whether or not you raise money.
If you are going to go for a product that requires a lot of upfront investment to do with compliance or maybe it’s got some hardware association, you’ve got to do some manufacturing or you need to do a huge amount of customer research in order to get the right thing.
Your timing is going to be really affected by your choice to bootstrap. With my experience of bootstrapping, it just so happens that with our products we were doing online scheduling. It’s self-service, and it’s freemium.
So because of that and that we started about 15 years ago, the timing for us to be able to stretch that out over a long time when you’re really earning very little.
Now for context to get that $5 million dollars, we have over 20,000 customers. We have a lot of small people, small engines, small amounts of money powering what we’re doing.
It takes a long time to build that up. So if you haven’t got the time to do it then that’s really helping you define whether you can bootstrap or not.
But what about you, Alex?
Alex: I think for me, SaaStock was a side hustle obviously before it was a revenue generating business.
I spent 12 months building an audience inadvertently, maybe a bit more credit around that. But 12 months doing that, and I think six months of those 12 months I was working full-time somewhere else working from home.
I had the time to work on the side project.
After 12 months of not being revenue generating I had an audience that I could then sell tickets and sponsorship into. We were then customer funded after the next 12 months.
Bridget: If you can’t afford a potential five year runway to get up to speed where you’re hiring people, you’re paying yourself and you’re feeling good about it – then that’s the point to take on a financial partner who’s going to give you some of that upfront cash.
The first product that myself and Keith, my co-founder, actually launched and CTO was literally in 2003. It was a survey building tool. It was called TickBoxer.com and we sold the domain since then.
It was exactly like SurveyMonkey. But we just realized in order to get people to use our survey building tool we needed a lot of upfront capital to invest in the marketing, the awareness, and the brand.
We couldn’t do it because we didn’t want to take our money in and it’s as simple as that.
We dumped the product. So as soon as we got YouCanBookMe we could see that natural viral growth rate essentially. We had the patience and timing to do it.
Lesson Two: The 3 Skills You Need on your Founding Team
Bridget: So again it’s the same sort of thing when you’re choosing to bootstrap versus upfront funding. If you have the money you can buy all the skills, fantastic. If you haven’t got the money you’ve then got to look internally what skills you have.
My view is that you’ve got three core things that you need inside a product, a SaaS product like ours:
- You need engineering, CTO, somebody who’s actually gonna code.
- You need operations and finance. Somebody’s basically going to deliver the business strategy.
- Then you need some kind of creative designer product owner. Somebody who’s going to sort of shape that product over time.
Keith and I had the first two. He was the engineer and I was the operations person.
You see that today 10 years later in the company. It’s a very engineering and operations led company. It’s taken a while for us to move across into a more product and design led sort of set of priorities.
I’ve never met somebody who’s one person with all three or two founders with all three skills. You either get three co-founders with those skills or you have to buy them in.
I would say actually nowadays it’s probably easiest to buy in tech engineering because there’s so many fantastic agencies that do it. As long as you’ve got a very good strong product desire you can basically hire people to do that for you.
But again, can you bootstrap without one of those key leading skills? How are you gonna pay for that skill?
Whatever you can’t pay for, you’re going to create some kind of debt. You’re going to create technical debt or customer debt or product debt or some form of cash debt. How are you going to do it?
Cash debt is borrowing money from an investor or any kind of borrowing money, that’s cash debt. If you decide not to take cash debt because you want to be customer funded, then you’re going to probably take on debt by one of the other pillars.
Lesson Three: Growing Talent Internally vs. Hiring Top Dollar
Bridget: Everybody makes mistakes. I loved what Becca was saying about hiring and how to essentially diversify and think about internationally who you can get.
There’s some incredible models out there now of people who’ve just decided to not employ anybody directly. They just go straight to the freelance market and only get freelancers. Gumroad is based on that model.
But the minute you start hiring and employing people, you’re introducing culture into your company. So you have to decide what that culture is going to be and how that’s gonna grow. What you pay them and how much you can afford is absolutely embedded and baked into it.
My view is pay as much as you can, and create a sort of minimal acceptable offer for people.
Don’t pay them the most you can. As soon as you realize that they’re going to offer you value and they’re going to keep helping you build your company, keep paying them internally to keep incentivizing and supporting the people internally who work for you.
You’ve got to do it within your bootstrapped boundaries.
We have done this before, believing that if you could just afford to pay somebody $150,000 a year, if you bring in some kind of six figure superstar that they will then have this transformative effect, but I’ve never experienced that.
I’ve never experienced the idea that by going out and paying a huge salary, I’m gonna get a 10X person to come in. All my 10X if you look at people who work for me now, who are on good salaries, they all started joining the company at fairly modest rates.
They basically worked really hard inside the company to get to that point where I realized just how powerful a team we are because of it.
You have to do that through culture, not just direct hiring.
Alex: Slightly the opposite for us. Obviously again, we’re not a SaaS company, but I feel like over the eight years we’ve been running as a bootstrap business, we haven’t really been able to pay super competitive wages.
We probably are not, I wouldn’t say underpaid, we pay well for all the industry that we’re in.
I think only recently in the eighth year are we now paying top dollar for senior leadership roles and we are seeing personally a 10X difference in these expensive folks.
But is that a disadvantage for bootstrappers generally, would you say Bridget?
Bridget: Absolutely. I think in some ways you just have to be kind of confident about what it is that you’re offering somebody.
It’s not the case that every single high performing person wants exactly the same thing. It’s relative to all these other things in their lives. You can find people who actively like YouCanBookMe as a brand if you like as a company. It’s pretty clear. I think it’d be pretty clear to anybody who wants to come and work for us what they’re going to get.
They’re going to get a small company because basically we have kept a lot of control over the size of our company deliberately, pretty much to reduce the sort of stress on us as founders. Look at Becca, she’s running a company of 150 people and she’s dressing up as a unicorn.
You find your strategies through.
I personally would find it very stressful to run a company with a thousand people. So there’s that. We’re small, we’re remote. Another big differentiator, well not so much now, but a big differentiator is to be remote. We’re bootstrapped. We’re profitable. We pay out profit share. We are very transparent inside the company and we document all of that.
We do it very deliberately. The aim is for somebody to look at our website and go, “Oh, those look like my people. I want to go work for those people.”
Now, when you get to that situation, you then really want to be able to say what we offer is fair. It might be above market rate, you might also get some extra in terms of bonus and profit share. It’s a package.
I don’t know if any of you were watching me last year in Austin. I was talking then about profit share. You end up introducing other parts of your company that you can incentivize people to be a part of.
Also, don’t underestimate the power of the offer to say you have an opportunity to really change something here. You can come in, here is the way we’ve laid out. Because we’ve been bootstrapped, we’re not under any pressure to kind of deliver to an external person’s criteria. We can build something that we really want.
One of our internal culture statements is commitment to excellence. That sometimes does mean we’re gonna rewrite something or we’re going to drop it because it’s not good enough. We have a quality control that matters to us.
We’re not just move fast, break things, hack it, move on, it doesn’t matter. Let the customer down, let’s go. Let’s go. Let’s go.
We don’t do that. There’s some people where they know they’ve got an opportunity to make a real impact, and that is just as important as their salary.
Lesson Four: Never Run Out of Cash
Bridget: Cash is king. I mean, my God, if there was anybody that doubted that after the SVB meltdown, they won’t now.
Actually as a bootstrapper, and we had money in Silicon Valley Bank, I was indignant about the idea that my money that we had earned from customers, hard earned customer money, was in a bank account that was potentially going to be lost or taken away or gone towards some kind of loss. I was apoplectic about that.
You can’t run out of money if you’re a bootstrapper. We didn’t raise cash, but we did borrow money. We borrowed, we had, we got banking overdrafts and credit cards, private loans. We did it. You have to watch how much money’s in your bank account.
It doesn’t really matter how much profit you’re making, how much you’re earning. You just can’t run out of money. I’ve never, ever not made payroll for the 12 years we’ve been running the company.
There’s only one way to do that, which is financial literacy.
One of the early things that I did was when I realized that we were bootstrapping for real. As soon as you take on people, you’re responsible for their financial security as well as your own, your company’s. I went on a financial literacy course. I basically learned about how profit and loss works, how balance a sheet works, how working capital works.
I run my business. It’s a business. It’s not necessarily a SaaS company or anything else. You are the same. Your overheads must be absolutely enormous in terms of being an event organizer. I can’t imagine.
Our gross margins are very good because it’s a software company, so it’s pretty simple to run, but you’ve got to be confident about what you’re talking about.
Alex: You mentioned earlier, that a book that you read whilst you’re bootstrapping that’s helped you was Venture Deals. Why was that?
Bridget: I would say to any founder who’s thinking about bootstrapping it sounds hard, maybe, maybe great long term, but sounds hard. Maybe venture capital or taking on investment is easier.
I would just say that’s fine, that’s completely legitimate, but you’ve got to be educated around the table. If you’re going to take money from a VC.
I read about 10 years ago, Venture Deals. Read that book because it will tell you exactly how deals are structured, what the incentive of the VC is, and what business that they’re in.
It’s a really great business. It’s a legitimate business, but it’s not necessarily got anything to do with what you’ve decided to sell as a product. You just have to educate yourself about what venture capital and corporate finance is about.
They’re not your friends. What they’re doing is they’re making money from your decision to go into business as an entrepreneur and make money. That’s a different thing.
My view would be to exploit them if you need them. If you need them for upfront capital, if you need them for upfront investment, exploit them because that’s what they’re there for.
Don’t think that they’re doing you a favor. The only way you’re going to learn that is by reading books and that’s a great book.
Lesson Five: How to Survive Burnout as a Bootstrapper
Bridget: That is a reflection of what happens if you’re bootstrapped, you don’t have this external pressure.
If you’ve just taken on 10 million quid from somebody, they’re obviously going to be hovering around making sure you’re not gonna spend that on sweets. You’ve got this accountability for your business that puts you into a different role.
Whereas if you’re bootstrapped, you can say, “Well, I don’t know if it’s my expense card or if it’s the company expense card, does it really matter? It’s my money.” You end up falling into patterns potentially around a 24 hour obsession with your business.
I just think it’s going to take you longer to bootstrap a company. You’re signing up for 10, 15, 20 years of your life. If you don’t put in boundaries soon enough, you’ll burn out like anybody else.
There’s nothing special about bootstrapping. My experience is, I’ve always bootstrapped, however, whatever pennies we had, whatever peanuts we had in our bank account for YouCanBookMe, it was always separate, financially separate from my personal expenses.
That way it just gave me some mental clarity about what I was doing.
Alex: When you’re bootstrapping, sometimes the growth is slower than you would like. Then you see other competitors in your field who are well funded and growing very quickly. Do you ever feel pressure from the Calendlys of the world or whomever else?
Bridget: When you’re a business owner, you never lose that kind of fear that something is obviously going to go wrong and you’ve got to take care of it.
At the same time, you have to be philosophical. Apart from anything else, we were in business before Calendly. We’ve been in scheduling for a very long time and our goals are different because we’re bootstrapped.
I don’t need to be a £200 million company in order for everybody who works for us and our customers to be super happy.
I’m glad to see, obviously Dingus and Zazzy are here in the room as well. Your money that’s in our bank account, that was in SVB that we’re protecting here. My relationship is to you guys. It isn’t to anybody else.
We’re all in the same business to try to serve customers and our primary relationship is with the customers who currently buy us and then are marketing and growth opportunities to try to persuade others.
You just have to be self-assured. You can’t go into business and be an entrepreneur and be worried that your idea is not good enough or somebody’s gonna take it away from you. You have to basically be a bit cocky.
You’re just like, “Well, I think we can probably do anything if we wanted to.” You just have to go in there and say, “Yeah, they’re great and they’ve been well funded and they’re doing whatever they wanna do.”
Why has that got anything to do with my ability to ship tomorrow and do the customer feature that somebody wants? To basically run a successful business and have lots of money in the bank and keep everybody happy.
They don’t have to affect me.
I think that’s another way of grounding, being sort of strong boundaries. I would say that resistance to pressure from competitors is a strong boundary.
That doesn’t mean to say you don’t pay attention, but you do need a boundary.
Lesson Six: The Reality of Raising Capital
Bridget: I recently had a lovely chat with a guy, Jim, who’s a growth equity guy. He was a guy turning up to these events specifically to try to attract companies to invest in.
He said, “Listen, VC’s tried to give you too much money because they’re basically trying to run down the fund. They’re trying to write big checks. If they tell you they’re gonna give you a million, they’re gonna try to make you take $5 million. Because their objectives are different to yours.”
He said, “Bootstrap for longer, don’t take as much money. Work out what you’re trying to do first, work out how you’re gonna make money from customers before you take money from VCs.”
Often in this world, people announce funding rounds as if they’ve just made some money. It’s like, “No you haven’t!” You’ve just either sold a bit of your company, or your customer has become your VC, or you’ve now just entered into some enormous debt structure. Where if you were under pressure you might have to pay that VC back three times whatever they’ve given you before anybody else gets a penny.
I think you just have to be literate about that. It is a perfectly legitimate form of finance.
Obviously Founderpath as well. Ten years ago, I was scraping around for 25,000 quid from NatWest on the high street of Bedford and they were like, “Oh, I’m not quite sure.”
I said, “I’m growing at 2000%!” I just didn’t understand. They said, “You’re making a loss.” “I know, but you need to give me money.” It was just such a headache.
I can believe that if Founderpath had been around 10 years ago, I would absolutely have floated in, got a million, off we go.
I’m not going to give away my company, to people who sort of feel like when they circle around in that first year and they give you those sort of preference shares and all the liquidation preferences and all the rest of it.
You read up on it in Venture Deals and you suddenly realize the game they’re playing, good luck to them. Well done. But don’t forget, it’s not your business. It’s their business model. It’s not your business model.
I’m actually quite evangelical about this.