In this episode, Angela shares how bootstrapping your business sets you up for success (and how comparing yourself to venture-backed companies can be dangerous for your business).
Angela Frank is a fractional CMO with a decade-long track record of generating multimillion-dollar marketing revenue for clients. She is the founder of The Growth Directive, a marketing consultancy helping brands create sustainable marketing programs.
Her new book Your Marketing Ecosystem: How Brands Can Market Less and Sell More helps business owners, founders, and corporate leaders create straightforward and profitable marketing strategies.
Angela is the host of The Growth Pod podcast, where she shares actionable tips to help you build a profitable brand you love.
Transcripts
Angela Frank:
Welcome to The Growth Pod. Today we're checking in one on one to learn why bootstrapped businesses have the advantage over venture backed businesses.
I'm your host, Angela Frank. I'm a fractional CMO and founder with a track record of generating multimillion dollar revenue for clients.
In:
So if you're like me and you love learning about how to grow your business more efficiently, you've come to the right place. Venture capital has been a really hot topic over the past few years, and maybe rightly so.
VC has been responsible for creating some of the biggest business successes in recent history. Think OpenAI, Shein, Canva, Stripe and ByteDance, just to name a few.
But it's also been responsible for some of the biggest, most spectacular failures in business as well. I know you've heard of Theranos. Think about WeWork, MoviePass. These are all VC backed companies that lost investors hundreds of millions of dollars.
One of the key points that I want to mention here is that VC is not set up to create a profitable business. Instead its goal is to push companies past their breaking points to see which select few will become unicorns and make their investors impossibly R.
Now before we go any further, I need to mention that I've partnered with about a half dozen VC backed brands on their marketing strategy and there is absolutely no hate or malice in what I'm sharing today. My goal with this episode is to pull back the curtain and show how VC backed companies have goals that are very different from your own.
I find that when working with self funded businesses it's really easy to look at a VC backed company in your industry, maybe who is a direct competitor of yours, see all the things that look great from the outside and try to emulate their strategies in your own business because they seem very successful. To illustrate this difference in goals, I need to share a quick story of a company that I partnered with on their marketing strategy.
Now I'm not going to be giving specifics, but this company was making about 15 to 20 million dollars per year and had a very strong sector of the market carved out for them. Their offer was unique and well received. They were moving up market meaning their average order value was stead increasing year over year.
Now they weren't profitable, but I think they could have been relatively easily. And I also think that they could have pretty easily grown into a company doing about 40 million per year since they were pretty new.
And again, people really loved their product and they had this great unique offering that was well received. Now, for me, a company making $40 million per year profitably is really pretty comfortable. But since this company is VC backed, that is not the goal.
Instead, this company runs unprofitably. They make tens of millions of dollars and lose just as much.
And because there is a consistent, unyielding pressure from their board of venture capitalists, their leadership team is forced to make quick and messy decisions that usually end up not panning out. Because of this, the company is confused. They're constantly taking left turns with their product offerings.
It's confusing its customer base and losing the trust that they've cultivated in their community. Ultimately, they're taking very large bets that, in my opinion, are not going to pan out.
And I really feel for everyone at this company that has to face this reality. Their board is going to continue placing immense pressure on them to hit growth targets or they'll stop funding the company.
And because it's not profitable, if that happened, it would likely die or be sold off for table scraps.
Now, instead, if this company was bootstrapped or traditionally funded through loans or maybe even a good private equity firm, they would be allowed to make decisions that support growing a really amazing, profitable and successful business. So what does all of that mean for our own businesses? Well, it's really two things.
One, venture backed competitors in your space are maybe looking like they're growing and doing all these great things, but it's more likely that what they're doing isn't working for them either. They're just propped up with all of these millions of dollars of funding that they're receiving.
And so if you look at their strategies and try and implement them in your own business, it's likely not going to work for you either, because it's not working for them.
And the second thing is that by putting your priorities in profitable and sustainable growth, the VC competitors in your space might seem like they're pulling ahead at first.
But if you keep your head down and focus on profitable and sustainable growth, you run experiments and learn what's working for your business, then your business will come out on top. Thank you so much for listening to this episode of The Growth Pod. I look forward to seeing you in the next one.
