Bootstrapping a company (in the podcasting industry)
Once upon a time there was a wise man who said "Rule number 1: never lose money. Rule number 2: never forget rule number 1". The irony is, he's actually one of the biggest investors of our time. But we'll come back to him later.
Every few weeks, a new startup in the podcast space appears and tries to become the new X (Netflix, YouTube, etc) of Y (audio, podcast, ears, insert any podcast-related term). Some of them are, on paper, very interesting. But more often than not, they do not manage to find a solid, sustainable business model. And disappear.
It's sad to think that a founder has to close his or her company. Doesn't matter if it's my competition, or not, I do not celebrate it. Or maybe it's just that I approach it in the wrong way, and many founders just fail, learn, start again a new venture. I guess it depends who you ask.
I feel like very rarely do people speak about bootstrapped companies. Why? Because they're not as spectacular as those huge, VC-money-burning furnaces ready to take over the world. Yet bootstrapped companies have something that others can't even see with their shotgun approach... We'll get to that soon.
Bootstrapped companies have a small head count – because there just isn't a huge pile of money in the bank account waiting to be evaporated away. This is both a good and a bad thing. At Podigee, we're 6 employees, we might double this amount in the next year. That might not seem very spectacular. I've seen startups without a product on the market, with more than our headcount. But to me, it's A LOT. It means that the business my cofounder Ben and I created, can not only pay our bills, but also give 4 other people (plus some freelancers) a safe, nice workplace, interesting challenges and products and services to be proud of.
So what is it that this small team of ours can do better than a large one? Laser focus. As a small team we can very precisely define what our customers need, think, breathe. We can literally see from very close what problems they have, and how we can solve them. But the laser focus also works as a guide for us – we can truly focus on the next thing that we need to do, without much overhead, without losing too much time because of redundant work or communication issues.
Sure, not everything is in favor of small, bootstrapped companies. Large companies have the advantage of economies of scale. Small ones, on the other hand, have the advantage of efficiency.
I'm not an MBA, nor do I come from a family with experience in running digital businesses. I learn everyday. I fail. I learn from my mistakes. It's tough business. I'm not going to lie to you. I guess bootstrapping makes you feel a lot more constrained with the options that you have available – and thus more creative. I felt literally anxious for weeks when we grew our headcount and money wasn't as abundant as before, even being a couple of months in the red. That made me a lot more conscious about how much effort it takes to grow to pay even for one person. Now that I know, I feel like I'm better prepared to keep scaling Podigee and taking it to the next level.
But let's talk money. A bootstrapped company treats money like someone who has worked hard to earn it. This is something that I have very present every day. I spend company money the same way I spend my own: by being thoughtful of the value I get for it. Money that goes out of our bank account might never come back, so let's better be sure it is spend correctly. Am I saying that I've never made a mistake that cost quite a lot of money? Nope, I would be lying if I said so. But with each new experience, I grow more thoughtful and have a more critical view of what the money is being used for (or what other things we could pay with it!). Thus wasting money happens to me pretty rarely these days.
When I see that Podigee is going to hit over € 600k revenue this year, I'm humbled. I know that it's little compared to other companies, even in the podcast space. But I'm also very proud. How many people you know personally have achieved this much already? With our current growth and a solid business plan we might even triple our revenue next year. We spend less than we earn, we have a proven, scalable business. We are by far the largest and most advanced podcast hosting company in Germany. We have a solid war chest in the bank in case we need it. We have flexible working hours, a 32-hour work week, optional home office and at least 30 days of vacation every year. Now isn't this what you can call a successful business?
I'm sure you've been waiting to know who is that wise man, I talked about in the beginning, who thinks that not losing money is a good idea for a business? That man is Warren Buffet. Yes, one of the world's most famous and respected investors and business magnates.
Are you a bit surprised now? Why would I quote an investor here if I'm all about bootstrapping a business? Because I'm not saying that bootstrapping is better than building a company with investor money! I just wanted to talked about the often overlooked advantages bootstrapped companies have over externally financed ones, especially in an early stage.
I want to challenge founders to consider that maybe bootstrapping actually is the right way to start their business. Maybe you can find investment later down the road, when you're sure you need it, and you know what to do with it.
Is Podigee always going to stay bootstrapped? Probably not. I know very well that a company needs to look forward, evolve, scale and reproduce its processes to stay in business. Some business ideas just require money to even become possible. And rest assured that we at Podigee are an ambitious bunch.
If we look at the podcasting industry specifically, there's so much happening these days. I can't actually spend a single day without thinking about the future of the industry as a whole and how it's going to affect my company. What is the best next move? How are my decisions going to affect the growth or stagnation of the revenue? Is there anything that we're overlooking?
Of course, the more you learn about your market, the better you start recognizing its patterns. I want to believe, that I'm going to interpret those patterns in the right way. For that, I'll keep doing the best I know: I will keep being an optimist, working hard to serve both our customers and employees the best way I can, building a legacy that is going to be remembered.