Bootstrapping with Angel Money: Josh Levy, CEO of BeenVerified (Part 7)

Sramana Mitra: I imagine, given what you’re doing right now, you’re already substantially profitable.

Josh Levy: We run a profitable business. We try to invest every dollar back whether it’s additional hires, marketing, or content licensing. We still see so much opportunities in data and where the broader space can go.

Sramana Mitra: That’s actually an interesting point for businesses that are bootstrapped. If you look at your business metrics, how much profit are you generating that you then decide to funnel into growth? How much year-over-year growth are you able to accomplish? Whatever you feel comfortable sharing.

Josh Levy: That’s a great question. I would be 100% lying if I said I have it exactly figured out. I would say that’s the question that I ask almost every single day. The right way of looking at it is the return that you expect to get, whether it’s return that you expect to get on an incremental dollar in marketing or incremental hire. It’s helpful having a Finance background. We have an expected rate of return that we want to get on that dollar that we invest back. If we get it, we’ll keep investing. If we can’t get it, then it’s better that you should just be profitable. We wouldn’t hire five new people to go after a project that we think would just lose money for five years. There has to be a hurdle rate of return that we want. That hurdle rate is dependent on risks and rewards. That is the decision that we make.

There’s the idea of product-market fit and validation at the macro level of your entire business but everybody should be asking those questions in every single project, feature, hire, and marketing spend that they do. Everything almost needs to have that validation. You need to have a similar metric framework for evaluating decisions. BeenVerified didn’t have product-market fit for three years. By staying lean, we were able to stay in the market and just keep iterating so that we don’t die. The way to be successful is to not die.

Sramana Mitra: That’s exactly what I say over and over again to entrepreneurs. Absolutely. You cannot be successful if you die.

Josh Levy: Just don’t die. The fastest way to die is to hire 10 people too early. We were four or five people for those two to three years. Had we been 10, we would have went out of business in 18 months. We were close to being out of business. We were very lucky. You need luck almost more than anything but we can’t make decisions with hope and luck. The best we can do is just the risk and reward in our favor.

Sramana Mitra: Today, are you trying to achieve like a 20% year-over-year growth? What are your plans?

Josh Levy: We’re still trying to grow quickly and actively. We were the fastest growing company in New York City and 26^th in the country as per the Inc. magazine 2013. Those growth rates are unsustainable obviously. It’s a more moderate growth. I don’t think, at this point, growth is the necessary objective. Making investments or bets that have the right risk-reward is how we’re managing the business.

Sramana Mitra: You’re not trying to exit anytime soon?

Josh Levy: In terms of exit or outside capital, those are not on the immediate horizon.

Sramana Mitra: The investors that have put in a couple of million dollars, what are their expectations? What do they think is going to happen?

Josh Levy: I think this is also another reason for not raising institutional money.

Sramana Mitra: It demands an exit.

Josh Levy: Yes, you have to exit. You have to be on this trajectory. They’re not necessarily interested in figuring out their dollars. Probably the best assets that we had were patience and understanding from the investors. If we don’t give them capital back for the next 20 years, they will be okay with it. Or if we give them capital back in the next six months, they’ll be okay with that too. They trust us to manage the business in the right way that we think makes sense.

Sramana Mitra: Do you want to run this business for the next 20 to 50 years?

Josh Levy: Yes. We’re having fun and we see a lot of opportunities. I can just see what the next three to five years is and that looks very exciting. I don’t know what’s going to happen after that.

Sramana Mitra: Very good. Thank you very much for your time.

This segment is part 7 in the series : Bootstrapping with Angel Money: Josh Levy, CEO of BeenVerified
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