This is the second in a series of case studies on capital efficiency when scaling a SaaS business. (See the first case study here on bootstrapping from $0 to $10 million in ARR).
Only some things discussed in either case study will apply to your SaaS business, but some strategies certainly will apply, and there is no better way than to learn from people who have done it.
Andre Lavoie and his partner Colin Kingsbury started ClearCompany when George W. Bush was President. Colin worked full-time on the product while Andre held down another job and funded the operations out of his salary. Andre invested one million during the four-year startup period, and that was the only growth equity used to build the business. When the company hit three million in ARR, they took out a line of credit from SaaS Capital, and when they hit $15 million in ARR, they recapped the business with Primus Ventures allowing their team to de-risk and double down. Their most important objective at the time was maintaining control so that they could continue executing their vision for an organic end-to-end HR platform.
Focusing on cash efficiency
From the outset, both founders had a broad product vision and a long-term mindset. When you pair an expansive product vision with little growth capital, the only other variable you can play with is time, and that was their approach.
“One key to success was not having a board to answer to early on,” comments Andre. “We made many decisions in those early years beyond most investors' time horizon.” Decisions that are now paying off ten years later.
Another key to their success is a keen focus on cash and operating metrics. Andre reflected, “I was ‘Mr. AR’, and Colin was ‘Mr. AP’. I collected cash from customers quickly while Colin paid the bills as slowly as possible.”
“I can’t imagine running the business early on without a clear focus on financial metrics. I would look at cash and metrics daily to see when we could afford to hire someone new.” ClearCompany was an early adopter of SaaSOptics (now Maxio), and Andre believes “It was critical to our success.”
When it came time to hire, the company focused on young talent with less experience but who were trainable. “At the time, we had to stretch every dollar, and so we hired people with ambition who were willing to trade salary for opportunity.” In its fourth year of business, the company's first senior hire was a 27-year-old CTO who now runs a team of over 50 developers.
On the revenue side, the company was exceptionally efficient at monetizing its installed base. Strategies consisted of various price increases, pricing changes, and cross-selling initiatives. “About 40% of our annual growth came from the installed base, and it was by far the least expensive revenue to capture.”
Bootstrapping your way to SaaS success
As ClearCompany enters its eighteenth year just shy of $50 million in ARR, it's clearly not an overnight success story, but it is a success story. For those with the tenacity, patience, and skill to make it happen, bootstrapping is a rewarding and lucrative alternative to the VC route.
Looking to bootstrap your SaaS without relying on VCs? Check out Maxio’s loan analysis calculator to evaluate your debt financing options and see how different debt structures will impact cash runway up to 36 months.