Most of the times, founders think that they need VC money [mistake]. Do you really need money?
There are plenty of companies that are doing very well, without any VC money. Depends on what you wanna do, depends on what is your REAL vision of your company, etc. We see numerous companies happy during angel and VC rounds (including us), but who knows that this is the most valuable road on a long term?
Balsamiq is exactly the kind of company that doesn’t need multiple round of financing and tens of millions to reach profitability. Balsamiq is what Giacomo “Peldi” calls a 5 stars restaurant. Small company, with just a few people, that is solving a small problem, but big enough to make millions a year and live well, very well. To give you an example, Balsamiq is on the same philosophy of 37Signals, a small company with less that 20 employees, but makes almost $50 millions [I guess] in sales a year. Do you have any idea how big the net income could be with a such low burn rate??? They sold just a tiny piece of the pie to Jeff Bezos, with the rest of the company in the founder’s hands, so they have a full control of their destiny.
Peldi started Balsamiq as “one man” company in 2008, and it has reached profitability in less than 3 weeks. During these years he has been approached by VCs and Angels (like all startups that are growing fast) who usually look for a 30X return in 5 years. But Balsamiq is a “5 stars restaurant” focused on quality, customer services and usability; he wants to keep his company small, without any “Boss” around him. VCs want big outcomes; when you raise money from a VC they will demand a veto right over the sale of the company, they want an exit. Peldi didn’t build Balsamiq with the idea to sell it, he doesn’t want an exit, he wants happy customers and a successful lifestyle business.
When you are are going to create a business, preserve your options as much as you can, and you have to understand if you’re going to build a 37Signals company or a Facebook one. Both ways are tremendously amazing and powerful, but they need a completely different approach. The biggest mistake that you can make is acting like you are a Facebook one, when you have a 37Signals company and vice-versa.
Out there we have plenty of ways to build something powerful, it’s all about knowing who you are. Everybody knows the benefits of building the Facebook one, however, building the Balsamiq one has a lot of positive points:
- Full control of your destiny
- Amazing net income % on the revenue
- Family environment
- No pressure from outside investors
- Small, valuable community
- Easier to keep the product as is
- Better focus
- Probably more satisfaction, because it’s all about you, and few others
Congratulations to Peldi, who is changing the world little by little!