Turning a Services Company to a $30M Product Company: Bridgeline Digital CEO Thomas Massie (Part 6)

Sramana: Have you taken any outside financing, or have you grown the company strictly from internal cash flow?

Thomas Massie: When we first started the company, I and some investors I was involved with at a previous venture put a few million dollars into a hat. That created the growth capital required to get the company started. Even when you have positive cash flow, when your business grows as quickly as ours did, there is still a need for growth capital.

One of the messages I give to entrepreneurs when I talk to them is for them to stick to the basics. There must be market need, build a better mousetrap, and always remember that cash flow is king. You must pay attention to that queue at all times. With no cash, there is no business. Period.

There is power in numbers. Don’t be afraid to share the equity of your business with potential investors or key employees who are going to help you realize your vision. You do need partners, either employees or investors, to get where you want to get. I have always made sure that my ventures are well capitalized along the way. Even if you are generating a couple of million dollars in positive cash flow, you are still going to need to be able to use that equity as a tool. Don’t allow yourself to suffer from founders syndrome where you want to hang onto 100% of the business and you get overly paranoid by dilution.

Sramana: There are good points there, but that is not entirely true. Some businesses have the potential to scale and some don’t. A niche business is better built as a bootstrapped business. If you mix the two models, you get a square peg in a round hole.

Thomas Massie: It is very difficult to grow any business without the right partners.

Sramana: The point I am making is that not all businesses have the structural parameters of a fast-growth, high-TAM business.

Thomas Massie: You are correct. If you build a business that is going to do a couple of million dollars of revenue, then you are absolutely correct.

Sramana: I see a lot of entrepreneurs who are building a $20 million business over 15 to 20 years. That is not the VC timeline.

Thomas Massie: I saw statics once that said that for every business that starts today, only 1% of those will still be in business in five years. Of those that are still in business in five years, only 1% will have revenue that exceeds $5 million.

Sramana: A minuscule percentage of the businesses that get started every year that actually fit the venture capital model. The VC model and equity share model do not apply to the majority of businesses.

Thomas Massie: I am a fan of the angel market. When I started my first companies, we went out to the angel market and we did proof of concept, we got to market, and we showed investors that we had a tangible, scalable business with a market need. Once you get that proof of concept and you get rolling with that, then your equity and the value of your business goes up exponentially. You don’t have to raise millions, just raise what you need. Maybe that that is a couple of hundred thousand dollars.

This segment is part 6 in the series : Turning a Services Company to a $30M Product Company: Bridgeline Digital CEO Thomas Massie
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