When it’s time to scale your business, the prospect of cash from a venture capital firm may sound appealing, but it can be tough to raise the funds you really need to grow. Getting VC funding requires extensive networking, rounds of proposals, and detailed projections about the future state of your business.
Finding the right venture capital partner is like finding a life partner – it goes beyond connecting with someone who’s willing to invest in your company. It’s about finding a partner whose mission, vision, and values match your own.
When we co-founded Cubii, we took a different approach, which ultimately helped us to find the right product-market fit and scale when the time was right. Cubii grew in just a few years from a Kickstarter campaign to being listed as one of Inc 500’s fastest growing companies in America in 2019. Here’s how we did it and a few strategies to help you grow your business without investments from venture capitalists.
The perks of crowdfunding: A captive audience
As young founders who were very early in our careers, we found that we needed to think outside the box to test and launch our idea. We had a concept for a product we believed in, but we needed to do two things to move forward:
- Raise money. We needed cash to help us manufacture our first batch of units to get them in the hands of users.
- Validate the market. Our idea was creating a new category in the market. This meant we needed to educate people around the solution and get our product in the hands of real users to validate the market, the use case, and the experience.
The best way to do these two things was to crowdfund our product launch. In the summer of 2014, we decided to launch a six-week campaign on Kickstarter.
Our campaign was a huge success, raising almost 3.5x our initial goal. Due to the traction we received, we were also able to raise a small seed round of investment from individual angel investors who helped us bring our first batch of Cubii products to life.
The power of pre-orders: Additional fundraising
Once we had a successful crowdfunding campaign, we found that pre-orders were a strong stream of funding. We began taking pre-orders on our own website from people who reached out to say they were disappointed to have missed our campaign.
This is where having a crowdfunded product became a boon: the campaign created a sense of excitement around our launch and identified early adopters who wanted to be part of the product development process.
We’re so grateful to all the early adopters who backed and supported us through pre-orders even after the campaign had ended. It was thanks to their faith in us that we were able to continue to invest in the very cash-intensive product development process and launch a product that people love.
Market smarter by focusing on ROI
If you were to raise a large cache of money, it might be easy for your marketing team to take big risks and make major plays for attention without carefully targeting each campaign. However, as a company that was building to be self-sustainable, we needed to be laser-focused on calculated risks. We’re proud to have built a process that involves constant testing and optimizing to stretch every dollar we have to its maximum potential.
Too often, we see young companies prioritize growth at any cost. Our mantra was slightly different. Irrespective of the size of our marketing budget, we kept our eye on the bottom line and prioritized efficient spending above all else. We still hold that principle close to our hearts, and this has helped us scale the company while being profitable.
For every dollar we spend on marketing, we want to see a certain return on that investment. We set aggressive goals for what that return should be. We always start with small tests and scale from there. This discipline is difficult, but it’s been essential to owning our brand, keeping our foundations solid, and helping our company’s long term success.
Don’t settle for a business model that’s not self-sustainable
Decide the pace at which you want to scale up front and aim for that trajectory. Don’t rush into channels that don’t suit your long-term financial goals for the company.
Our focus has always been on building a solid business, first and foremost. If at any point we find that outside funding would help us towards that goal of scaling, we would not shy away from it. However, we don’t believe in raising funds simply to give us a runway and support an unsustainable business model.
Be receptive to what the market is telling you
From the first products that went out to the customers who backed us on Kickstarter to the products that ship today, we include a postcard in every box that includes our CEO’s phone number. Keeping those lines of communication open has been a key to helping us meet their needs better. Our customers love to write to us and share their stories, and we can’t say enough about the value of their feedback.
We aim to create as many opportunities as we can for our customers to get in touch with us. Their comments and concerns are our direct line to the market, and their feedback fuels our improvement. From the literal nuts and bolts on our Cubii machines to our marketing positioning, customer input is key.
Whether through market research, customer support logs, or NPS surveys, pay attention to your customers’ feedback. Listen and learn from what the market has to tell you. You’ll be surprised at what you learn.