Pretty exciting right!
But as a profitable fast-growing bootstrapped company, you might be asking yourself "Why did you now decide to raise money?"
It's true we did not need to raise, we already scaled the company to millions in subscription revenue and built an incredible remote team in a short space of time.
But as with every decision, there is a lot more to it when you scratch below the surface. So in this post, I want to unpack the thinking that led us to make the decision to raise our Series A with Sequoia Capital.
For those of you who don't know us, it might be worth first reading how we got turned down by VS's, rejected from YC and also how we bootstrapped from $0-$1M ARR in just 12 months. Hopefully, this will provide some additional context to this post.
Now without further ado and in no particular order, let's get to it!
Opportunities like this are rare.
We have all heard that 90% of startups fail. What is even more shocking is that only 1% of the remaining startups reach $10M in ARR.
Now we are not doing $10M ARR yet, but we are fast approaching it. Entering the top 0.4% of SAAS startups will be an absolute privilege, not one to be taken lightly. When in this rare position that few founders find themselves in, we feel that we should really cease this opportunity and do justice to the product, our customers, our team, as well as ourselves as founders and see how far we can take this.
What makes this opportunity even juicier is that we are in a big market. Canva was just valued at $40Bn, Adobe is one of the largest SAAS companies in the world with a $300Bn Market Cap and last year Vimeo went public at a $6Bn valuation. We had done our research, (and so had our investors) and we would not have taken a penny if we did not have conviction on the market and our current position in it.
Now, we have gotten this far without raising any funds, so imagine what we could have done if we did have it. Since the very start, our users literally pulled the product out of us. They loved VEED but also demanded more features and more product. Enterprises and teams have also wanted more collaboration and security features. Our team have worked extremely hard to keep up, but often we found ourselves over worked and under resourced. This is what many people call "A good problem to have". The funny thing about "good problems" is that they are still problems. Raising capital gives us the ability to get ahead of it, take advantage of the opportunity and deliver an incredible product to our users.
Yes, we could do it completely bootstrapped, but at a much slower pace. It would be super hard to look back in 5 years and think we could have been XXX but we where just too slow. In the last two year, it has never felt like we have had to push VEED up hill, the company wants to grow and intern needs more fuel to do it. We believe this additional capital gives us the resources to build a truly amazing product for our users, much faster, and in turn helps us execute on our vision even faster than before.
Technically, it's a hard product to build.
Building any product is hard, but building a collaborative online video editing platform is very hard. If you are interested to know what goes into building an online video editor, we wrote an article on it here.
No offence to job boards, but if we were building a job board we would probably not have raised any money. The resources we need to serve millions of users editing, rendering videos and sharing video is significant and the technical challenges that we face are hard.
But our users don't really care about that. They care about the end product experience. With the limited resources, our team has done a phenomenal job building VEED to where it is today. I am so proud of everything the team has achieved.
As a bootstrapped company, we would unlock new hires every month based on our growing monthly revenue. We did this for over two years, but with increasing demand from users and new teams internally. Now with funding, we can invest ahead of time into our core product and also branch out into new product areas that would not have been possible before.
This will result in delivering better products to our users faster and not relying on our projected cash flow to scale.
We are no longer a group of kids with nothing to lose.
When we started, I was 27, my co-founder was 25 and our early hires were in their early 20's. We had minimal outgoings, no mortgages, and no little ones to take care of. We would eat falafel from a market stall for lunch, drink tinnys in the park and cycle everywhere to keep our outgoings low.
Now our team is a lot bigger and a lot more diverse. Members of our team have kids, families, and responsibilities that twenty-somethings don't. Operating with minimal room for error was keeping me up at night but so did the slow down in the development cadence.
As the company got bigger and our payroll scaled into hundreds of thousands per month, the stakes got higher. The addition of capital now gives us a good buffer and the ability to provide more stability for the team. Small fluctuations in revenue per month no longer phase us, thus allowing the team to focus more on the long term.
Now, my co-founder Tim and I still do eat falafel, drink tinnys in the park and cycle everywhere and thats important for another reason. Now we can take a big swing and throws ourselves at it. If at the time of fundraising and I had kiddos or other major life commitments, I might not have made the same decision.
If I look back at all the decisions we have made so far, we very much are on the high risk side of things. If we wanted to cash out, we could have accepted an acquisition offer and drank Pina coladas all day long. But thats sounds really shit, we are having too much fun building this company and want to keep going!
We raised later in the game.
From first-hand experience, raising funds when you have revenue is much easier than when you have none.
When you have revenue, investors find you, they pitch you and they make the effort to get to know you and your company. When I posted on LinkedIn and Twitter that we reached 1M ARR, we must have had about 100 cold emails from investors. Some found my phone number online and would whats app me and call me.
When you have no revenue, it's a lot of cold emails and rejections. (Trust me I have been there.) Unless you went to a fancy school, worked at a FAANG or joined a now famous startup at the right time. Put simply – revenue and/or fast user growth is a leading indicator that you are doing something right and that's the time where capital gets unlocked.
Looking back, we are lucky that we got rejected from YC. This has not only saved us 7% in equity, it also put us off the venture funding track for 2 years. We have now passed many dilutive funding rounds and also built the company to significant revenue.
Maybe if we were accepted to YC, we would have followed the traditional venture path and our cap table would have looked like this.
- 10% family and friends / Per Seed
- 7% YCombinator
- 10%-20% Seed Round
- 10%-20% Series A
Instead, our cap table looks like this.
- 100% Founders and team
If you can get to the position where you don't need to raise because you are profitable, any deal is "take it or leave it". This is a great position to be in. You can dictate your own future. You can also use it for leverage if you want to sell secondary shares or special terms in the deal... All very common once things are going well.
We found the right partners to work with.
After many many calls with various investors, I felt like they fell into two different buckets. Some who want to buy a part of your company and the others want to back your company. Our interactions with Luciana at Sequoia felt very much that she wanted to back us, we liked that.
Another thing that was important when we were thinking about working with an investor was if they wanted to chat with us just because "Video is hot", or if they generally thought that we were doing something interesting in video.
Growth rates and revenue tell a good story, but really trying to work out what investors know about the industry and approach of the business was key.
After getting to know Luciana and other partners at Sequoia, we were really impressed with how they where thinking about venture and the relationships they have with startups. It really felt like they wanted to back us, not buy a bit of us. I asked if they could meet me for coffee at an Austrian schnitzel restaurant next to my gym and to my amazement, they did. And instead of offering to be helpful, they proactively made intros of other CEO's in bigger companies so we could chat with them.
We really felt like they understood what we where doing and what role that venture plays in the startup world. Experience prevails, Luciana and Sequoia have a great track record and we are very lucky to be working with them.
There is so much more to unpack here, I could go on for days. Every founder, company and market is different. There is no wright or wrong answer to the questions "should i raise or not?" you just have to pick the path that best alights with your vision of the future.
Starting VEED from nothing with my co-founder Tim and building this into what it is today has been an absolute pleasure. No really, it's been incredible. Yes, it has had its ups and I am sure there will be much more of that in the future. I am so grateful to our team, (you know who you are) our customers, and the doolally ones who believed in us before anyone else did. I don't know what this crazy ride has in store for us next, but I am excited for what the future will bring.
If you want to find out more about our series A, Journalist Ingrid Lunden from Tech Crunch has written a great write up which you can find here.