[Video] Founder Talk: Fundraising vs. Bootstrapping
Founder Talk: Fundraising vs. Bootstrapping
Andrew Filev, Founder + CEO,
Andrew Filev, CEO and founder of Wrike, discusses the advantages and disadvantages of fundraising and bootstrapping. Andrew is well-qualified to discuss this having bootstrapped project managment software, Wrike, for 7 years before raising a $10 million Series-A and then three years after that a $15 million Series-B.
Recently named in Silicon Valley Business Journal’s esteemed “40 under 40” list of rising stars, Andrew has a unique philosophy that he applies to revenue and fundraising that is well-worth listening to.
Don’t miss the chance to hear from more experts like Andrew at the many tech startup events at Founders Floor in San Jose.
Founder + CEO, Wrike
Andrew Filev founded online project management software company, Wrike, in 2006, shortly after immigrating to the U.S. from Russia. Wrike was named one of the fastest growing companies in North America on Deloitte’s Technology Fast 500™ List for the third straight year in 2017. Andrew originally founded his first software consulting company at age 17 and Wrike was born out of his frustration at the limitations that emails and spreadsheets hold when it comes to rapidly growing an organization. Today, Filev serves as Chief Executive Officer of Wrike and remains the primary visionary behind the product and company. In product development, he values innovation velocity with a customer-first approach.
This video was recorded at a Founders Floor Startup Event in San Jose, California. Our CEO, Matt Day, hosted this Fireside Chat with Andrew. The transcript has been lightly edited for the purposes of easy reading.
So, in those earlier years, especially when you’re boot-strapping and being in the project management space solidly at that time in the early years — there starts to be competitors coming into the marketplace. And sometimes those competitors, for whatever reason, can raise money and all of a sudden, that lead that you had over them becomes very short at that point.
How did you manage that? Because I’m assuming others in that space did raise, and there was psychological pressures and company pressures. How did you work though that?
Well, I had the benefit of experiencing a lot of pressure, so at some point you stop caring. So I lived through two financial downturns, you know? And, as you can see, I grew a lot of gray hair here, so it’s like who cares if somebody raised whatever, 20, 50 million dollars? It’s not the end of the world.
So, when I started the business, there was already a company called Basecamp, which back then was all the rage. All the start-up press, all the business press — it was the hot new thing. So, everybody knew about it, everybody wrote about it. And, in relative units, in terms of their brand recognition, they probably were bigger than anybody else today. Including us, including our direct competitors.
So, I started with that. And it was funny where, I actually charged more for my product than they did, right? And there were friends who shared their friendly advice, “Why are you charging more?” And I’m like, “Well, because I’m providing more value.” Right?
And I was going back to that bootstrapping strategy. I’m a very direct person, so I always believed that customers should vote with their money. I would be delusional if I said, “Hey, my product is better, but nobody wants to pay more for this compared to the other player.” Right? So, I felt, “Hey, I’ll build a better product, and I know exactly why it’s better.” Because it’s not just surface level. It’s not bells and whistles. Fundamentally, in Basecamp you could get not get visibility across those multiple things. Basecamp looked pretty nice but, at their core, it was very similar to SharePoint. You had a website for a project and God bless you if you tried to get visibility across writing multiple projects or multiple functions.
So, I fundamentally had a different view on what work management platform should be and I believed that if I provide that value for the customers, then they would vote with their money.
That’s a long story, but it answers your questions. And later when competitors came to market, they are more directly trying to copy our model and raised a lot of capital, I’m like, “All right, I’ve kind of been there. I’ve competed in David and Goliath ways, so now you’re trying to catch up with me. Good luck.”
But there were sometimes scary moments. I remember before we got any funding, one of the competitors came out and announced that they will offer a premium plan, up to 30 users back then, and our average account size back then was 10 or 15 users. So you’re looking at it, “Well, okay. That is going to be a challenge. That’s interesting”
For me, it’s always less about funding because you fundamentally see a lot of companies who raise a lot of capital and then quickly burn through it. And sometimes that actually hurts them more than helps. So for me, it was always less about funding and more about marketing product. Can you differentiate enough from your competitors, and not just on the PowerPoint, but in the customers’ eyes? Will you be able to persuade your customers that your product is significantly better?
We were always able to do it. The name of the game is always staying a couple of years ahead of your competitor. Which, if you don’t raise funding, you can choke them out. So they will still grow, and will still kind of breathe in your back, but again, as long as you’re a couple of years ahead on the product side, you will still be always able to grow and grow even faster than they do.
I totally agree with that. And what I’ll just add is that it’s all about execution for the company, as well. Raising their money, whatever they want to do, at the end of the day, they’re going to have to go through the same processes you did, maybe accelerated, but they still have to make those micro-decisions to find the success path just the same as you did. As long as you keep innovating and they keep innovating, you’re always gong to have that lead, like you’re talking about.
So, let’s see. Boot-strap for the first five, six years. And then you raised a seed run for a million dollars, I think. And then, what was it? About a year after that, you boosted the internal metrics up to the point where you can then raise that $10 million Series A and then three years after that you raise a $15 million Series-B.
Why raise the Series A and Series B? In other words, if you get to that point where you know, you’ve been bootstrapping, and you created the hockey stick, which is super hard to do. That’s like, winning the lottery. To be able to create the hockey stick, so you can build off your own profits. And so, you raise that seed – that makes sense. But then that Series A and B … Tell me more about the thought process with that.
So, seed versus A is an interesting example. I told you that I believe in age-old philosophies — I actually approached it in the same way to funding. So, back then, based on our size, we should have raised like $20 million. Instead of doing that, I raised one, to just see how it goes. And it was going good. We were accelerating. We were able to deploy that capital. And then I raised 10 into the company, that sort of gave us another boost.
And that boost was very helpful. One unfortunate thing is that, in the Valley, people do look at funding as a measure of success, which I hate. It should not be.
Your measure of success should be your customers, your product, your revenue. The amount of money you raise should never be a measure of success. Unfortunately, people use it as a proxy. And so, it did help us in that I used both the capital, and just the fact of it, to bring on a very experienced Chief Revenue Officer. Together, we built a sales organization on top of that inbound funnel. Together, we 10-x the business over the next three years.
So, it was very good story. Again, I tested it a little bit. And then I felt comfortable doing it. And for me, another good thing is I really like the investors. So they’re still on board and are advocates for our vision in the broad sense of the word. So, they believed in vision. They believed in me, which again, back then, we didn’t have any fancy offices, we were in a class C building around the block. And, being capital ventures, they have an amazing office in Boston and so, they come to this kind of funky office. And, they had to have some guts and believe, but they saw a common pattern.They were pioneers and saw us and believed in my vision of connecting the work and people together.
So, that went really well. And also, there was good chemistry between me and the fund, where none of us nickeled and dimed each other. It was a good deal for everybody. I always believe in that, when you do investments. You want everybody to be happy. You want you to make money, you want your employees to make money and you want your investors to make money. You don’t want to kind of skew it into one direction and skew the other part.
So, it was good chemistry and it was a helpful step. And then, we did a couple of raises after, but it was always fairly unconventional in the sense that, in the Valley, it’s common to raise the largest amount of capital you can raise. Whereas we always fought really hard to raise the lowest amount of capital we could raise. So the last raise, we didn’t even announce because it was less than five percent of equity versus a typical venture round is at least 20 percent of equity. And we’ve always done it on very clean terms.
One thing that happened in the unicorn age, a lot of companies wanted to get to billion dollar valuation. So, they threw in some funky terms, which I can later educate you, or somebody else can educate you on, to boost the valuation. But again, it skews the incentives on the Board. So we always went for very, very clean terms and I always was very adamant with investors that we want to be in the same boat.
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