From Bootstrapping to VC Path

Quick Overview:

If there’s a whiff of dogma in suggesting that writers ought to place their creations only in certain genres or mediums unless they concoct fictive alter egos, there’s something categorically cultish about the belief that founders who choose to bootstrap/raise VC should then forever tie their identities to those choices.

In 2010, MagicBell’s co-founder and CEO, Hana Mohan (@unamashana), started her first SaaS venture (SupportBee) partly inspired by the idea of being “bootstrapped, profitable, and proud.” Embracing a particular way of operating and a very particular set of beliefs.

If you root your identity in being a bootstrapper, then it’s very hard to change…You should define your core values as a founder. But then also be honest with yourself about where they come from. Your own first-principles understanding of the world or as a result of following someone else.

Now, having been through a decade of building and understanding SaaS, Hana has decided on the VC track for MagicBell, and is deeply aware of this alternative’s own inherent limitations. And she has learned to weigh any type of capital as it must be weighed: as a suitable means to achieving a specific end; nothing more, nothing less.

“Capital, I’d tell my past self, is just another tool”

So the reason I switched from building SupportBee to MagicBell, from being a self-funded business to the VC track, was because I wanted to start afresh and because I understood the workings of the SaaS flywheel much better.

I had realized that typical, high-growth SaaS businesses required front-loaded investments into the product, customer support, and other foundational functions. A solid base for future, compounding revenue growth.

That’s something fundamental to SaaS. Much of the value exists — in getting retention right and gradually expanding your reach — in the future.

So it only makes sense to invest upfront.

I had begun to see the other side of a mainstay (assumed) constraint, most bootstrapped businesses apply to themselves: ‘You shouldn’t raise money. You should be profitable all the time.’

If you can bootstrap, then more power to you, but it’s actually getting harder and harder to do that, given the landscape we’re in today.

I was very aware that I wanted to raise money, build a sizable company, and solve a daunting industry problem that’ll keep me engaged for at least a decade if not more.

The funny thing is when I was bootstrapping, some people would say, ‘you can raise a 250K round or something. And we would say, ‘we can make that ourselves in a year, we don’t need an investment.’

Then, on the other hand, I also believed if you do raise a few million, you’re pretty much all set. And, of course, when you raise those few millions and you start building a company, you realize that you actually need even more money.

With more cash, I used to think, you could start paying people 100K/150K salaries or whatever. And then people will just flood the doors. You will have an infinite supply of amazing people. It’s not at all true.

You’re very much constrained by how fast you can grow a good team. And keep things coherent. Money makes certain things easier for sure, but also brings its own constraints.

A key one being: You need to grow at a certain pace year-over-year. You need to be growth-focused. You need a long-term mindset and you can no longer delude yourself with, ‘it’s fine, we have a lot of money in the bank.’

As a self-funded operation, you control your own pace. If, in a given month, you feel a little burnt out, you can take it easy next month. So you definitely lose that flexibility. That’s the game you’ve gotten into.

When you raise, you also lay out a big vision, which attracts people who’re keen on growing fast and not settling for anything less.

All that said, I still retain the bootstrapper’s mindset. I still value being profitable a lot. But it’s not the thing that I value the most.

Capital, I’d tell my past self, is just another tool.

Back in 2010, many founders like me, got their sense of self-worth in being “bootstrapped” founders. Not deploying bootstrapping as a tool when necessary, but bootstrapping as a way of life.

If you root your identity in being a bootstrapper, then it’s very hard to change. If you root your identity into being an entrepreneur, into being a problem solver, then it’s markedly smoother if not easier.

You should define your core values as a founder. But then also be honest with yourself about where they come from. Your own first-principles understanding of the world or as a result of following someone else.

The other thing people don’t realize is that core values do shift over time. They are not truisms that are forever true. For example, the whole ‘Jeff Bezos and doors being used as desks’ story. If you don’t have doors as desks, it doesn’t mean your company is wasteful.

People think that if ‘I have a core value of frugality now, then I will always have it.’ Maybe you will. But you don’t need to. It’s your choice. It’s a good tool, now. But you should be able to throw it away when it isn’t.

So fundraising was a very conscious decision. It came from my personal experience of having been an entrepreneur on a given path, and then, deeply personal also, in that I went through a gender transition and came to the other side wanting to carve a new identity for myself.

Two GTM perspectives that most certainly impeded progress

We definitely restricted our growth at SupportBee, because we had all of these hang-ups with sales. In the community that we were plugged into back then, sales was almost a dirty word.

Sometimes companies just get lucky. Their organic motion can keep them growing for a while. But a lot of times, that doesn’t happen. Growth stalls.

We learned that, of course, nobody wants to be sold garbage or things that are not of value to them. But good sales is really like being a Sherpa. Guiding people through an experience and helping them close and just breaking down the costs of certain decisions.

Even after acknowledging the value of sales, I still had to learn how to layer a sales motion to build predictable revenue and things like that.

That change actually really only happened after getting into YC. And then interacting with a lot of people there. Talking to sales coaches.

And just asking ourselves, or just witnessing how it is that some companies grew so much in three months, and then some are just like, ‘oh, we are very product-focused, and we need more polish.’

So YC was a catalyst for me in terms of really widening my horizon. And that’s why I highly recommend it.

This has helped fend off our past resistance of going up-market. We are embracing the challenge of still being that product-driven company, such as Notion or GitHub, where one developer can start on her own and then we also have the sales capacity of expanding to larger accounts.

Another mistake I made with SupportBee was that, as a founder, once the inbound demand engines started working, I became product/solution-focused to a fault. We stopped being loud about the problem we were trying to solve.

Despite being very much in the first wave of products that were positing the case that customer support should be just as simple as email, we lost market momentum.

The advice that when you get tired of saying something is when people really start hearing it, is painfully accurate. It’s worth asking yourself: Do you believe the problem is more important than your solution? Or do you think your solution is the only thing you should be selling?

What we’re ever really selling, I think, is resonance with a problem. You are convincing customers that you’re thinking more deeply and obsessively than anyone else about this problem.

When you are attempting to build a comprehensive solution to a pretty ubiquitous, large problem, it becomes even more important to convey the vision of the company, the gravity of the problem, way more than the solution.

Your solution is always going to be imperfect, or, perhaps, incomplete, in comparison to the scale of the problem and the challenges people are facing as a result of it.

Consciously decoupling the two has an immediate effect on the quality of demand, and in turn, the kind of product you end up building.

When you’re trying everything to get traction, which is what we all do early on, you start bringing in a wide set of users and it becomes challenging to make sense of their feedback, to figure out who you should be building for today and later.

When you are clear about your philosophy, though, that works as a filter. For example, we had the clarity that we didn’t want to innovate for the martech stack, because there are plenty of those solutions.

So we don’t get customers who are trying to come over from, let’s say, a OneSignal or something because they want to split test five variations of something. Once you have a homogeneous set of customers, it becomes easier to process their feedback and prioritize it.

I don’t think prioritization is an exact science, obviously. Sometimes you do things because it moves the revenue needle, maybe without a big customer, you would have done it three months later, but you pull things up a little bit. You’re still making those trade offs. But you’re largely moving in a better direction with a vision.

I’m still learning this, of course. And doubling down on telling MagicBell’s story differently. That’s why even with a small team of 6, we’ve already brought in a senior product marketing person to get our specific points of view on the problem out there from the very beginning.

To me, it almost feels like perfecting stand-up routines.

If you watch Aziz Ansari or any other major comedian, whatever jokes their Netflix specials end up having, are the ones they’ve been experimenting with and crafting over different talk shows for years.

It’s a process. You start with certain core ideas. You see what resonates with people, you improve some, you drop some, and finally, you come up with this one set that you can perform.

The work of communicating a company’s vision is performative in that way. Not performative in the way that it’s not based on something real, but it is certainly something that you need to refine and get better at.

If you believe that, then there are specific things you can learn. Practice. Emulate people that do it well. It’s like a journey. Like being an engineer. You’re never really done learning.

Stacking up

With MagicBell, we’re definitely not trying to take the ‘do one specific thing well’ path. Which was inspired by Basecamp and that SaaS moment in the early 2010s.

That particular product trend, aside from some niches, is coming to an end. For solving complex workflows, people actually want a huge chunk of things done by a single product.

If we want a shot at building the next Twilio or the next Segment and fix something badly broken for a large market and move fast, we must, as Square’s co-founder, Jim McKelvey proposes in his fascinating book, learn to stack multiple solutions on top of one another:

“The problem with solving one problem is that it usually creates a new problem that requires a new solution with its own new problems. This problem-solution-problem chain continues until eventually one of two things happens: either you fail to solve a problem and die, or you succeed in solving all the problems with a collection of both interlocking and independent innovation. This successful collection is what I call an Innovation Stack.”

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