There’s one thing startups should crave more than capital
Too often we seem to focus on capital intensive startups with multiple rounds of VC and celebrate their high paper valuations.
The “lack of VC” is a common gripe in the Australian startup landscape, but do you know what there’s more of a lack of? Customers
Specifically an attitude within government and corporates to lower their risk threshold and buy from startups is lacking.
Raising money is hard work. I’ve done it, and 50% of BlueChilli startups have done it. But it shouldn’t be the objective.
When you have good sales – raising money is significantly easier. Even if it’s the first dollar that proves the business model is on the pathway to the magic $10m revenue figure, which demonstrates scalability – a sales driven startup will succeed far better than a VC-driven startup.
Let’s look at one of our portfolio companies - I’ll keep their identity private for reasons soon to be obvious. In their first six months they booked just under $2 million in revenue and doubled that in the next six. Are they raising money? No! They don’t need to and the founding team is able to maintain their significant majority equity position.
Contrast this to an Australian entrepreneur who has amazing subscriber signups in the hundreds of thousands but is yet to yield any significant revenue and after several funding rounds and business model pivots to land on a working revenue model, now only owns a few percent of their startup.
That’s why when evolving the BlueChilli model, we’ve worked out a way to start with the customer from day one.
Recently we just completed one of these programs with Westpac, where we solved real problems in activity workplace environments. Although Westpac was the sponsor, the opportunities they presented are common amongst many workplaces. The five startups, like SpaceConnect, are all built, have all launched and have landed customers and sales outside of the program sponsor – because they’re solving a real problem.
Starting with the customer first means you get product-market-fit right from the get-go.
It has its challenges - you don’t want to build a solution for just one noisy customer, you want to find a balance that reaches many - and the principles of lean startup still apply: don’t build the Taj Mahal when all you need is a tent.
But it’s proven to be a powerful way of starting a company with the right focus on making sales.
Sebastien Eckersley-Maslin is the CEO of BlueChilli. This piece was originally published on the BlueChilli blog.