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As a co-founder of a technology company, I'm no stranger to Silicon Valley's dream of creating a startup that is resoundingly successful almost overnight – with sales potential for billions of dollars. But, pursue the dream of a billion dollars at a price; you are forced to place short-term income above almost anything else that is important to you, including the experience of your employees and the ability to take larger risks (without the promise of a good deal). an immediate return on investment).
This dream was so close to me, in fact, that there is barely a year and a half, my co-founder and I had the opportunity to cash it. We had the opportunity to sell the company for an amount of money. But the idea of selling looked more like a failure than an opportunity. At that time, we did not appreciate the process of building society and all our efforts were focused on short-term rewards, with no creative accomplishment. If we wanted to have a chance to repair what was broken and to make the company what we wanted, we could not put ourselves under additional pressure from investors. We had to try to make things better.
So we decided to go all the way to the less traveled technology and do it our way.
To do this, we had to make big changes. We had to redeem shares and replace the stock options of our employees with a profit sharing program. The only problem with this decision was that we had lost (for several years) to fuel our rapid growth. And without enough money to buy the stock, we had to find another way to raise money.
Most of our advisors encouraged us to hire a new equity investor, but we knew that this strategy would take us back to the position we were trying to avoid. In the end, this investor would like to earn a return – just like our current investors. So we decided to raise $ 17.3 million in debt for the payment.
With this plan, our participation in the company would increase, but the risks would increase: we would be willing to repay a large sum of money, and if we omitted payments, we risk losing control of our business completely. . In addition, we will need to build on the hires we have made to support our growth. By baduming this debt, we had no choice but to grow as we wanted: sustainably, with a focus on creative and long-term solutions for our clients and our team.
For us, the reward was worth the risk. By taking this path, we could reinvent the business and make it a place where we and our team really want to work. On our previous growth trajectory, we felt compelled to manufacture the cheapest products on the market, which had a negative impact on our culture and the way we do business. By incurring debt, we had the opportunity to focus on our products, our customers and our culture, without losing the potential for profitability.
We spoke to a number of technology-focused private equity firms and, of the four offers we received, we chose the one that offered us the appropriate amount of debt and favorable terms, while being enthusiastic and favorable to what we wanted to accomplish.
Abandon "growth at any cost"
Fortunately for us, this strategy seems to have worked. We had contracted the debt we needed in early 2018. Since then, our turnover has grown faster than ever (over 40% yoy in the first quarter). And our new product – a Google Chrome extension – is gaining ground.
By controlling advertising expenses and slowing down hiring, we are not only the most profitable we have ever been in our 13 years, but we also do what we love: build simpler, faster and more useful products , while taking the scale. – and more creative – risks along the way. As it has worked for us, we have already been able to refinance our debt at a better rate, which is essentially the easiest way to raise funds without giving up control of your company.
Previously, when we spend our growth rate, every creative investment had to provide a return on investment. This meant that we spent a lot of time playing cautiously, working on innocuous things that produced abnormal results. Instead of the creative and long-term risks that we savored, we took risks in the short term, motivated by financial considerations.
The "growth at all costs" approach has focused our priorities on projects that can accelerate our growth in just a few months, instead of working on more significant projects (such as redesigning the buggy dashboard). But everything has changed since we decided not to sell.
Explore creative risks
A big creative risk that our new flexibility allowed us to take was to create a four-part docuserie – mostly commercials for our product – that involved man-hours and substantial investments. Because each of the ads had roughly the same scenario, the same length and the same themes, our goal was to determine whether the increase in ad budget in ad (from $ 1,000 to $ 10,000 to $ 100,000) would result in higher quality production value and higher performance. a d.
We would never have been able to conduct this type of experience if we had not decided to restructure the company. And that would have been a shame, as it turned out to be the most successful brand marketing we've ever done. He also won the Webby Award for "Best Original Series".
Where do you want to place your bets?
It took us a long time to understand what we wanted to be and how we wanted to structure our business. We were fortunate enough to find our voice and a successful approach early in our journey and even more fortunate that our decision to abandon "growth at all costs" did not result in a total failure.
What did we learn? While it's important to have an idea of what a successful project looks like, you should never use a measurable financial gain as the sole measure of that success. Instead, you may find that when you place your bets on your team and your desire for innovation and exploration, your company has the potential to become more creative – and even more profitable – than to find a better position. # 39; before.
Chris Savage is CEO and co-founder of Boston-based video software company Wistia.
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