In recent months I’ve spoken to dozens of B2B SaaS founders who are having challenging times raising series A or B funding.
After more than a decade of low-zero interest rates followed by an inflationary funding period of 2021-2022 many founders who made their growth strategy over reliant on additional funding find themselves in choppy waters.
There are some interesting differences how founders have been responding to these challenging funding times. Based on my interactions I group them into 3 categories:
- Survival mode: cutting operating expenditure to a bare minimum to keep business afloat.
- Sitting it out mode: reducing the cash burn rate to extend the run rate in the hope/expectations that funding will be easier in 12-24 months.
- Strategic review mode: rethink their entire growth and funding strategy.
I’ll focus on the 3rd category. These founders see difficult times also as an opportunity for innovation and resilience. They explore ways towards sustainable growth strategies independent of external funding.
In my interactions I’ve noticed some common approaches these founders take:
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- Lean and mean. Bootstrapping empowers founders to maintain control over their business and build a sustainable foundation. Despite prudent cost control careful consideration is given not to underinvest in growth drivers.
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- Data driven. They challenge their teams to constantly running experiments. This allows them to learn fast, optimise customer journey processes and product development efforts based on actual data.
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- Customer focused. Rather than solely focusing on scaling for the sake of growth, these founders concentrate on customer satisfaction and retention. Gross Revenue Retention (GRR), Net Revenue Retention (NRR) and Live Time Value/Customer Acquisition Cost ratio (LTV/CAC) are considered key metrics to determine the health of the revenue growth strategy.
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- Effective partnerships. These founders nurture a robust partnership network both at operational as well as at sales channel level. An effective partnership model empowers these companies to achieve more with less. More product synergies, and more channels to market at lesser cost than trying to do it on their own.
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- Product Led Growth. Product led growth (PLG) is not the answer to every SaaS problem and not suitable for all type of software offering. However, there are core elements of PLG which founders adopt successfully in their pursuit to achieve sustainable growth: User Centricity, Virality, Network Effects, elements of Self Service. In short, they are exploring ways for the product itself to do much of the sales, marketing, and customer success work.
With these approaches the smart founders are trying to achieve sustainable growth, control of the business without depending on additional external funding to survive. All the energy and time typically required for founders to raise funding goes into building the business. An interesting side effect is that these type of companies often naturally attract investors and/ or M&A opportunities.
Funding plays a crucial role for B2B SaaS businesses. But there are alternative, not often publicised growth strategies. Very rarely you hear celebrations in the business news about success stories of bootstrapped companies achieving sustainable growth without excessive funding, to the benefit of all involved stakeholders, clients, employees, founding shareholders. In many cases such a strategy also guarantees founders the highest financial rewards for themselves.
If you are a B2B SaaS founder having challenging times raising funding, then it is certainly worthwhile to connect with and learn from founders who have managed to successfully scale their businesses without excessive funding.