In the startup world, the traditional name of the game is rapid expansion at all costs: raise funding, expand the team, and pursue scale as fast as possible.
That approach has worked for many companies, but as everyone knows, 90% of startups fail—so it clearly hasn’t worked for everyone.
Today, as a second-time founder who launched a company during the “AI Renaissance,” I’ve adopted a different stance. In this article, I’ll explain why in 2024, it’s better for startup founders to bootstrap their startup, not just for as long as they can, but maybe forever.
This article originally appeared on Forbes.com.
In 2016, I co-founded an automated underwriting platform for the multifamily industry called Enodo. By early 2019, it was acquired by a publicly traded company in a multi-million dollar deal. I learned many valuable lessons from this experience. My top three being:
1. You only get one chance at a first impression.
2. Focus on building a truly exceptional product before you do anything else.
3. Sales, marketing and raising too early only distract from product development.
I learned these lessons because we did all of these things wrong with our first startup.
We raised millions of dollars, hired a team that was bigger than it needed to be, spent tens of thousands each month on marketing, and quickly made subpar first impressions with a large portion of the industry while burning through capital.
Ultimately, it worked out…but I knew I could do it better if I had another chance.
So last year I left my post-acquisition corporate job, ready to take the leap back into the startup scene. With my latest venture, HelloData, we’re taking an entirely different approach.
This sounds antithetical to everything a startup should do, but this time around, we’re spending next to nothing on marketing, and our cold outreach has been minimal.
Why? Because you only have one shot at a first impression.
If you inundate people with ads, cold calls and high-pressure sales tactics before your product is ready, you’ll squander your chance at a good first impression and they will never come back.
If you focus on the product and deliver exceptional service to customers, you’ll end up getting more of your leads through word-of-mouth referrals than anything else.
When your product is good enough that your customers are excited to share it with their network, you don’t need to interrupt peoples’ days with unwanted cold calls or ads…they’ll find you.
If you launch a startup and immediately hire a salesperson to reach out to prospects, a customer success rep to manage relationships, a product owner to manage the roadmap, and engineers to build the product for you, what do you get?
A worse product, worse customer relationships, and a slower path to product-market fit.
Why? Because you’re creating an unnecessary game of telephone.
The salespeople secure customers, who interact with customer success reps. The customer success reps convey feedback to the product owner, who conveys it to the engineers, who hopefully build what the customers ask for. But with each link in the chain, information is lost, and the convergence on product-market fit slows down.
A mix of technical and industry expert co-founders can do all of the above while building strong relationships with early customers. It’s more work, of course, but progress will come significantly faster because you can respond to customer needs more quickly.
If your customers like you and you consistently deliver for them, they will in turn deliver contract renewals, expansions and plenty of referrals for you.
In 2024, I am convinced that small, agile startups can outcompete significantly larger companies through automation and AI.
At HelloData, automation and AI are at the core of everything we do.
As a bootstrapped startup, we are forced to find ways to provide an incredible product, exceptional customer support and effective marketing and sales operations with a team of three, funded only by the revenue we bring in. This is a very good constraint.
For us, this means we had to develop automated data pipelines, machine learning model training, note taking, content generation, onboarding and payments, and basically connect every system we use to every other system we use—so no one on our small team has to waste time manually moving data from Point A to Point B.
This strategy has not only minimized manual tasks but also ensured that our team remains focused on what matters most: the product.
It also means we can always make time to brainstorm with our clients, who in turn help us shape our product roadmap.
These days, raising a ton of money and hiring a big team doesn’t necessarily result in a better product or customer experience. In fact, it can do the exact opposite, impeding your ability to achieve product market fit and scale faster.
With all the recent advancements in AI and automation, I encourage founders to leverage technology to scale faster vs raising capital.
By focusing on your product and customers and automating everything else as much as possible, you’ll have a better product, happier customers and cheaper marketing through word of mouth referrals. And it’s nice to be able to hold onto your equity too!
Schedule a demo to see our multifamily analytics platform in action.
