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Four Tips To Winning At Startups—Without Venture Capital

By Vineet Madan

Rippling, a company working to simplify HR & IT for employers, just raised $250M at a $6.5B valuation. A cashflow management startup, Pipe, is raising an oversubscribed round of $150M at a $2B valuation, a little over a year after raising it’s $6M seed round from Craft Ventures. Meanwhile, the popular clothing brand Rent The Runway has raised more than $500M and IPO’ed with a valuation north of $1B. 

It is easy to become envious of the hyper-growth and seemingly limitless pools of capital available to today’s rock-star founders who headline Saturday Night Live and move markets by sharing memes (we’re looking at you Elon Musk). Raising massive amounts of venture funding, quickly, appears to be the only path to startup success…or is it?

For every founder that makes the headlines with eye-watering levels of fundraising, there are thousands upon thousands of others toiling away in near obscurity.  In the United States alone there are over two million startups that are under two years old.  You’ll find dozens of non-VC funded unicorns that have scaled into household brands – MailChimp, Shutterstock, CarGurus, SurveyMonkey and Atlassian are just a few that did not rely on VC-powered rocket fuel to take off. 

In fact, the overwhelming majority of the millions of businesses that are founded each year never raise venture capital. No legendary trips up and down Sand Hill Road. No chasing Patagonia vests at VC conferences, and certainly no late-night exchanges with Marc Andreesen in his Twitter DM’s. 

That said, grinding a path to building a successful business without venture capital can often take a decade or more. But overcoming the challenges of building a business without venture capital can be hugely rewarding.

Here are a few tips you can use on your journey:

1) Build products or services that people are willing to pay for 

The storied, VC-fueled “land grab now, business model later” strategy is exceptionally high-risk and not the likeliest path to success. It doesn’t have to be hard—to launch Shutterstock, Jonathan Oringer bought a camera, took 30,000 pictures and started a website selling inexpensive stock photos that he had taken himself. 

Product-market fit still applies, and your first products won’t be much more than a MVP. However, they should be just enough to get your target clients to understand the value, pull out their credit cards and make a purchase. Keep in mind they are not just paying you for what you can deliver today, but also what they think you’ll be able to grow into over time. Why? 

Chasing revenue early minimizes cash drain and accelerates the time to breakeven.  While many entrepreneurs are uncomfortable with putting out anything short of “the perfect product,” don’t let perfect become the enemy of “good enough,” and a viable business, as it’s easy to burn millions of dollars and just never get there.  By the way, revenue as a funding source is non-dilutive and immediately additive – at a multiple – to the value of your business.  Try to get to first revenue as quickly as possible and certainly in the first year.


“While many entrepreneurs are uncomfortable with putting out anything short of ‘the perfect product,’ don’t let perfect become the enemy of ‘good enough,’ and a viable business, as it’s easy to burn millions of dollars and just never get there.”


2) Create a business model that works, scales and can fund growth

A sound understanding of economics helps, but all you really need is a basic understanding of fixed vs. variable costs. If your sales and marketing expenses exceed your revenue it’s going to be awfully tough to create a lasting business. Too many companies fall into the trap of pricing (with a margin) on variable costs, failing to account for the reinvestment requirements on fixed costs as growth ratchets up. Don’t become one of these companies.

According to research by JP Morgan Chase, organic growth contributes the majority of small business revenue four years post-founding. Focus on revenue-generating customers early, keeping in mind that product-market fit still applies. Get to it as fast as you can to minimize the cash drain before you get to real margins and improve your odds of surviving and thriving.


“According to research by JP Morgan Chase, organic growth contributes the majority of small business revenue four years post-founding.”


3) Balance working capital

One of the other known pitfalls to successfully building a business isn’t the right product, pricing or distribution. A savvy, resourceful, entrepreneur will do the research and figure those things out in time.

The one challenge most entrepreneurs never see coming, and one that isn’t easy to address in real-time, is working capital management; and it’s a problem that only gets more acute the faster you grow. Scaling requires more resources, be they staff, inventory, servers, etc., which all cost you money now. Customer contracts, with 30- or 60-day payment terms, can mean that your cash receipts may lag your expense growth by a few months or more. 

The difference between your cash to be collected and what you are paying now is working capital. An oft-cited US Bank study suggests that up to 82 percent of businesses fail due to cash flow mismanagement

While growing Junction at a 90+% CAGR the last few years, working capital is one of the main things that keeps me up at night and one that we have carefully managed for over five years using a rolling 13-month cash flow forecasting spreadsheet. There are non-dilutive financing options available, and now founders have more alternatives than ever before. Research Small Business Administration grant programs early and opportunities such as receivables or recurring revenue financing as you grow (e.g. Pipe).

Now that you know about it, don’t let working capital management become the reason your business fails to reach your goals.  


“The one challenge most entrepreneurs never see coming, and one that isn’t easy to address in real-time, is working capital management and it’s a problem that only gets more acute the faster you grow.”


4) Listen to your clients

One of MailChimp’s co-founders was making eight to ten cross-country trips each year to talk to small business owners to find out their pain points. MailChimp took these conversations and translated them into new ways to make their lives easier. Listen, ask questions, take notes—this isn’t the time to sell, you already have the business. This is the time to listen, learn and find clients that will help you test and develop new features and functions. 

Clients want to grow with you and are invested, with their own businesses, in your success. One strategy we’ve employed at Junction is to provide a high-touch experience for our first set of clients. Both my co-founder and I are directly involved with these treasured client relationships, and always will be. The insights gleaned from these conversations are unparalleled and you will need long-standing client references as you “level up” the targets you are pitching.

Build and maintain these relationships; they matter in your eventual success.


“Clients WANT to grow with you and are invested, with their own businesses, in your success.”


While finding clients, tuning pricing and juggling working capital will never garner big headlines they will help you build a meaningful, and lasting, company.  Waiting to raise venture capital for as long as possible – perhaps never raising it at all – should be a strategy considered by more founders.  If you opt to take this path, ignore the headlines and self-congratulatory VC tweets and know that this is the path travelled by many more of us than you’ll ever know.  Welcome to the club, we’re happy to have you.


Vineet Madan (@vimadan) is an occasional angel investor, former corporate venture investor, and founder and CEO of Junction Education, a market-leading learning platform-as-a-service that powers digital learning for Adweek, Front Office Sports, LingroLearning, Yale University Press and other companies and organizations on the forefront of transforming education.

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