1Mby1M Philosophy: Bootstrap First, Raise Money Later

This morning, I received an email from Aaron Skonnard, CEO of Pluralsight. Aaron, as you may recall, is the Utah entrepreneur we covered last year, who has bootstrapped his online education company to $12 million. He wanted to let me know that the company has just raised $27.5 million dollars in Series A financing. In a blog post, Aaron explains:

“As our brand began to receive more attention from the press, quite a few investment firms began to reach out to us. Although contrary to our initial instincts, we decided to keep an open mind. Then we began educating ourselves by researching the various possibilities and their pros and cons. Shortly thereafter, it became a very competitive process, and before we knew it, we had a long line of firms interested in our business.”

Well, if you have a profitable $12 million business, the likelihood of investors wanting to invest in your company is high, especially if you can show the growth trajectory it would take through infusion of capital.

We would love to see you in this position where YOU – the entrepreneur – have the negotiating leverage. VCs are chasing you, rather than vice versa. You can choose to take money that is offered, as Aaron has done. You can also choose not to take money, as Sridhar Vembu has done. Sridhar’s company, Zoho, is well above $200 million in 2014.

Here are some more examples of entrepreneurs who have raised Series A later on in the game:

• Raising a Series A with $10m in the Bank: Dean Stoecker, CEO of Alteryx
• Bootstrapping to $25m then raising a $23m Series A: Andy Chou, CoFounder of Coverity
• How to get to a $20m Pre-money Valuation in Series A: Tableau Software CEO Christian Chabot
• Bootstrapping to $1m, then growing to $40m with venture capital: Ryan Allis, CEO of iContact
• The Montana Mogul: RightNow CEO Greg Gianforte ($5 million bootstrapped revenue; Series A at ~$100 million valuation)

Numerous other bootstrapped companies have positioned themselves such that if they wish to raise money, they can.

There is much to learn in their stories.

Note: Also check out our new Thought Leaders in Big Data (TLBD) interview series. Starts with Sequoia-funded AgilOne, which, incidentally, is also a bootstrapped company that raised money much later in the game with over $15 million in revenue.