This startup turned down $30 million from a VC. Is this the end of startups on steroids?
If you were asked to pick the most successful startup, which one would it be? Now consider why you chose this company. Was it because you have seen how much they have gained in funding or because of the work they do?
Most people would answer with a well-known startup, like uber, Airbnb, or glassdoor. And they are right, these are all successful startups. But what about all of the companies out there that are growing exponentially without raising any funds?
Paris-based sales automation startup, lemlist, is breaking barriers by proving that startups can succeed, and even thrive, without raising a single penny. What’s more, they are showing that in some cases raising funds can hurt a company.
On February 5, lemlist announced that they would be launching a challenge to raise $20 million in two weeks. They tackled this challenge in the public eye, documenting every step of the process on YouTube, Instagram, and LinkedIn so that other entrepreneurs could learn from their experience.
After 2 weeks they announced that they had succeeded in their challenge. Their pitch to Pascale Diaine from Storm Ventures was successful, they were offered $20 million and were taking time to consider the offer. One week later they came out with their decision and with news that they had received an offer from another investor, this time for $30 million, and that they declined both.
Guillaume Moubeche, CEO of lemlist, detailed the main reasons for saying no to the offer in a video on his YouTube channel. He even reveals that in this second offer the three founders were offered to split $15 million amongst them, totaling to $5 million directly in each of their pockets. Some people might consider a man that turned down $5 million crazy but, after looking at the facts behind his decision, it adds up.
75% of U.S. startups that raise funds don’t ever return investors’ capital. Even worse, there are numerous horror stories of companies that have raised hundreds of millions of dollars only to mismanage it and create people management nightmares.
You might remember the story of Bird, a California-based startup that raised $623 million. They ended up firing 400 people less than 4 months after their latest round of fundraising (in which they gained $75M).
This is exactly the type of problem bootstrapped companies like lemlist are trying to avoid. lemlist isn’t the only company skyrocketing to success without any external funding.
You might know the stories of Spanx, Mojang, and TechCrunch. All of these companies have bootstrapped their way to millions without looking towards external funding.
You can also find cases like Atlassian, which bootstrapped its way to $55 million in the bank account before going for its first round of funding.
After considering all of this, we have to wonder what the meaning of success in startups really is. Success is often associated with the amount that a company has raised. On the other hand, if a company can make millions and be 100% owned by its founders wouldn’t this be considered a success?
Success can be many things in the business world, but above all, it means creating something that your customers want. Companies like lemlist are now showing us that whether this is done through external funding or bootstrapping shouldn’t define the success of a business.