We are often asked how much money we have raised and it seems that our success and capabilities are sometimes judged on that metric. To be sure, having a vote of confidence from a VC is a badge of honor and may even increase your chances of success, but the decision is a lot more complicated than that. We decided not to seek outside investment despite having access to wealthy friends, colleagues and professional investors.
Before we dive into the reasons why we chose this path, I must disclose that I’m a sucker for prestige. It hurts when others don’t see me as successful or doubt my capabilities. Luckily, Chad is well grounded and reminds me that making the right decision to build an enduring long term business is more important than my ego.
With that in mind, there are plenty of reasons to get investors, in fact getting adequate capital is sometimes necessary to make a technology business model viable. Certainly this is true for businesses that want to keep growing but must float significant costs for inventory, development or user acquisition while they’re recouping the customer’s lifetime value. It’s also true if the founders don’t have personal savings, they need at least some money to live. There are, of course, also soft benefits like access to an investor’s contacts, prestige, great advisors and being able to hire outside help instead of learning to do something yourself.
With this line of thinking in our heads, we decided against an investor because we didn’t see any need to trade equity for money to grow the business. We can build the site ourselves, the business model doesn’t requires floating a lot of user acquisition costs and we both saved diligently for years so we’re not starving without a paycheck. The soft benefits like PR and great advisors was the one benefit we needed most. To fill the gap, we’ve been identifying strong mentors. We’ve been treating this as a core part of our strategy, and have had a lot of success. On average, we’re meeting with 3 new mentors a week and identified a lot of absolutely phenomenal ones. We’ll continue to grow our network, but are committed to concentrating on developing deep relationships with a select few that are passionate about helping us succeed by introducing us to their network and being brutally honest with their feedback. Is it the same as board meetings with investors, no, but so far it’s been pretty effective. The true test will be whether we can get the corporate partnership and PR contacts we’ll need in a couple months.
The guys at Everlater thought the same way and ultimately changed their opinion and got funding from with what I understand is a great VC partner. We’ve talked with them at length about that decision, so if anyone else is interested in getting in on this discussion, feel free to jump in.