On Ambition

several well-intentioned founder friends have warned me with some version of “Ryan, you need to raise money or else XYZ competitor will beat you.”

this is a reasonable concern; here are my counter-points:

  • i need full control of my business (ego)
  • investors prohibit full control (conflict)
  • our product, vision, team, brand are superior (unrefuted)
  • profitability safer than growth-at-any-cost (precedence)

for my peers, however, this is unacceptable.

“i guess it depends on your ambition” they say.

now that my company’s revenue is public i’ll tackle these concerns by explaining what ambition does and does not mean.

you need money to get things done

ambition is “determination to achieve, typically marked by hard work.” 

correct me if i’m wrong, but the more resources we have, the more we can do with those resources. this in mind, what’s easier:

hiring 10 people w/ OPM (other peoples’ money), or doing the work yourself?

if Fomo raised $1mm+ tomorrow, i could:

  • stop pushing code at 2-3am
  • hire an assistant to fix my schedule
  • hire a marketer to double our growth
  • beef up support and stop taking midnight customer calls on the weekend

after all, software companies raise money to hire people. founders hire people to fire themselves. raising money makes day to day life easier.

but we aren’t raising money, so i don’t have those luxuries.

while founders can simultaneously raise money and be ambitious, it doesn’t follow that raising money is a pre-requisite for ambition, given ambition is marked by hard work, and work is exponentially more difficult to complete with less help.

(this counter-point alone is worth an essay on founder personalities <> masochism but i’ll save that for my next mental retardation series.)

you need money to survive

if your average customer lifetime value is $500 and you spend $500 acquiring them, your business is hanging out, waiting to die, like my Grandma in ’97.

at Fomo our monthly marketing spend is ~$650, and we acquire 500-700 new users /month. by spending less than $1 per lead we’re able to achieve 500x ROI.

survival: check.

digital advertising is cocaine for marketers who lack original ideas. they can’t help but take another hit, and they’re useless without a monthly “budget” fix.

unfortunately, a disproportionate amount of venture funding is spent on expensive drugs like digital advertising vs systems that decrease customer acquisition costs or increase lifetime value.

my take: never let your business rely on a crack head whose entire life is dedicated to getting more people to click on a picture.

you need money to recruit talent

some founders are proud of their fundraising metrics.

the rest of us are forced to share achievements in the market vs which investors we convinced with which Powerpoint.

communicating your vision, mission, objectives, and values (thanks Jeff!) is paramount to building a team that does great things, especially feats like outlasting well-funded competitors.

for example, this week i began recruiting 4 new team members… maybe 1 of them will work out, maybe all 4, maybe 0.

so far these folks have not asked about our funding, just how much they’ll personally be compensated. sounds fair to me.

you need money to grow

let’s define “growth” as an increase in revenue or decrease in expenses that results in the founder(s) being paid more.

this should be obvious, but startup accounting is not subject to laws of physics.

Scenario A

  • bootstrapped company
  • generates $100,000 /month revenue
  • free cash flow: $30,000 /month

Scenario B

  • venture-backed company
  • generates $200,000 /month revenue
  • free cash flow: $20,000, because they have 15-20+ employees

in Scenario A, the founder can pay themselves the difference.

in Scenario B, additional cash flow is injected back into the business, often by hiring 2-3 more people, resetting monthly burn (spend) to just above revenue.

if these numbers look made up, they’re not. it’s actually more common for Scenario B companies to generate $2-20k /month in sales while spending $30-100k /month on their team, marketing, and ops.


you need money to get rich

in all fairness, let’s suppose the founder in Scenario B la-la land above does not mind a smaller paycheck, even though they live in a major city (San Francisco, NYC, etc) and have a kid on the way.

in 5-10 years, they argue, they’ll exit for 10x more than Scenario A founder and the $100-200k /year difference will be negligible compared to their acquisition from iGooglebook.

by supposing this, however, we also have to consider other projects a Scenario A founder might hack on while Scenario B company grows at-all-costs.

while Scenario B companies are indebted to their investors, Scenario A companies belong to themselves. the founders, team members, and partners at bootstrapped companies can pursue as many other ventures as they can personally manage.

in my case, for example, i’m building 3 other platforms which generate another $25,000 /month in revenue, and i own the majority stake in all of them.

this extra cash and peripheral opportunity means Scenario A (bootstrapped) founders can hedge against themselves, ultimately taking even bigger risks in overcoming venture-backed, hot potato Scenario B adversaries.

Tortoise and the Hare.

full circle

to my founder peers raising money, burning the candle at both ends, and relinquishing control to investors:

maybe you’ll build something special. maybe you won’t.

it depends on your ambition.