On October 28 one glass ceiling was shattered.

Therese Tucker just broke a glass ceiling as the first woman founder/CEO to lead a venture-capital-backed Los Angeles startup to an initial public offering, according to The Los Angeles Times’ Paresh Dave.

Not just a woman, but a woman of a certain age, 55, who built her company, BlackLine, over the last 15 years the hard way.

“I funded the company up until 2013, and there were some very difficult times,” she said. “I ended up putting in everything that I had into it. First the nest egg from my options from my previous company. But then I drained my bank accounts and my 401(k). I told my kids, had I been able to access their college savings funds, I probably would have taken that, too. I second-mortgaged my house. I maxed out my credit cards. I begged from friends to cover payroll.
It was difficult and humiliating and scary. I thought, ‘Oh my god, I’m going to be a woman in my 40s who’s bankrupt and starting over,'” she said of the years through about 2005.

That’s grit — the thing everyone is talking about.

BlackLine went public $2 above the target price and soared from there.

On Friday morning, the shares opened at $24.52, a 44% pop. The stock was trading at around $23.31 midday, giving the company a $1.15 billion market cap.

The result of that $2 increase meant raising $46 million more than than the $100 million planned.

Tucker didn’t build BlackLine by raising round after round of funding in an easy money environment—she bootstrapped it.

She did, however, jump on a still unproven new technology/business model.

The turning point happened in 2007, when the idea of cloud computing was very new. She and her team decided to quit making old-fashioned software and sell the service exclusively through the cloud.

And that was true grit.

Congratulations, Therese Tucker.

One Ceiling Down and a few more to go.

This post is dedicated to every woman of every age who has put herself at risk to follow her dreams — whether as an entrepreneur or something else.

Image credit: California Community Foundation

A Friday series exploring Startups and the people who make them go. Read all If the Shoe Fits posts here

Last Friday I compared valuation based on investment vs. revenue with AppLovin as my example.

Put another way, it’s the difference between focusing on outside money and inside money, AKA, revenue.

“One of the problems with raising money is it teaches you bad habits from the start,” said Jason Fried, the co-founder of the software company Basecamp, who has written frequently on the perversions of the venture capital industry. “If you’re an entrepreneur and you have a bunch of money in the bank, you get good at spending money.”
But if companies are forced to generate revenue from the beginning, “what you get really good at is making money,” Mr. Fried said. “And that’s a much better habit for a business to work on early on, to survive on their own rather than be dependent on money people.”

That’s the approach embraced by 16 year-old MailChimp, with 2015 revenue of $280 million and will top $400 million this year.

As a private company, MailChimp has long kept its business metrics secret, but founder Ben Chestnut wants to publicize its numbers now to show the road less traveled: If you want to run a successful tech company, you don’t have to follow the path of “Silicon Valley.” You can simply start a business, run it to serve your customers, and forget about outside investors and growth at any cost.

Chestnut also doesn’t have a Silicon Valley ego, as demonstrated when defining the company’s values

I asked all of our managers and senior managers to help me out with them, and we came up with three: creativity, humility and independence.

and hiring.

I’m looking for that philosophy because I want someone to push me and make me better. I want people who are smarter than me, and who will push and fight for something they believe in while also respecting the values and unique nature of the company. We have to be creative in pushing our boundaries, but sticking to our values.

There is an interesting thread I find running through founders who bootstrap and build their companies by focusing on generating revenue, as opposed to fundraising and hypergrowth.

Both types have vision, focus, drive and grit, but, based on reading, those building their companies on internal money don’t seem to have the same need for validation — not of their vision, but of themselves.

Image credit: HikingArtist

A Friday series exploring Startups and the people who make them go. Read all If the Shoe Fits posts here.

In the course of my work with startups I’ve found there are three main reasons for serious screwups.

1. Founder ego
2. Speed (cramming 20 hours of work into 12 hours day after day almost guarantees a few (or more) blunders)
3. Tight budget (leads to cutting corners)

It was number 3 that tripped up Ben Landers, president and CEO of Blue Corona Inc.

Landers made a minor change in a form job offer letter, but didn’t have it reviewed by their lawyer.

“I took a boilerplate job offer letter and updated it—I thought—for Blue Corona,” (…) He considered running the letter by an attorney, but at the time it didn’t seem worth the expense for the struggling startup. “We had no money back then. Zero. We were losing money in fact,” recalls Landers, who launched the Gaithersburg, Md.-headquartered startup in 2007.

It’s hard when your company is running on fumes, let alone negative fumes, not to see legal advice as a luxury and take a pass.

But it proved a very costly mistake.

Changing the language of the job offer letter relating to commissions amounted to the addition of one bullet point, he notes. In the end, Blue Corona paid its former employee between $10,000 and $12,000, probably 10 to 15 times what it would have cost to have an attorney update the job offer letter, estimates Landers.

Funding, and money in general, have gotten tighter, so it’s tempting to skip checking with a lawyer, accountant or other service pro.

But it’s smarter to count Landers as your avatar and what happened to him as a lesson learned and a bullet dodged.

Image credit: HikingArtist

Founders, closely follow those they wish to emulate, “names” they trust, peers, competitors, etc., mostly from the viewpoint of the media or their own self-generated content (blogs, articles, etc.)

In other words, content developed for either the entrepreneurial community or general public.

Whereas CB Insights was created to provide information to industry.

So in 2010, they launched CB Insights to use data, algorithms and predictive analytics to help customers answer questions about “what’s next?”

• What company is our next customer? Investment? Acquisition?
• What’s the next big industry we should position ourselves in?
• What are our competitors up to and what is likely their next move?

And while it’s doubtful you could afford a subscription, or that it even would pay to have one, its newsletter is a goldmine of information — plus it’s well-written and an enjoyable read.

I reached out to Anand Sanwal, CB Insights’ CEO / Co-Founder / Customer Service with the following questions.

Your About page states that CB is revenue-funded. Why did you make the decision not to seek funding?

We were revenue-funded for our first 5.75 years but did take $10M of funding in November 2015. More on that here. 

What special challenges did you find and how did you overcome them?

In the beginning, it was figuring out how to get our name out there since nobody had ever heard of us.  We started doing data-driven content to stand out and this worked.  It’s been our secret weapon.

Other than that, there are the perennial challenges of recruiting, building a great product and selling. These challenges are not unique to us. They just keep changing as the organization grows.

Regarding Lesson 1 of the CB Insights Quantitative Venture Capital Class, are there more lessons? If yes, are they also free and is there a tag/link that accesses them all?

There are several. They are here, here and here. (Be sure to use these links! Ed.)

How useful is your content to entrepreneurs?

Entrepreneurs waste inordinate amounts of time doing diligence on investors and markets, and so it’s very useful to them. Knowing who the most active investors are in a space or who has the highest follow-on rate saves them a lot of time.  

The alternative is Googling around doing lots of data janitor work.  Based on feedback/emails we get in response to our newsletter, founders have been very appreciate of us cutting through the noise with data.

Is there a best way for them to utilize it?

We’re an institutionally oriented product with a nearly $40,000 per year average price so the best way for them to use us is to subscribe to our free newsletter, follow us on Twitter (@asanwal)  and read our research blog. 

Our target customer is not founders/entrepreneurs.

Any other comments or advice that you think would be useful to founders?

I read a great quote (not sure who said this) to “never take advice from someone who doesn’t have to live with the consequences” so take this as my disclaimer.  

Everyone’s situation is different and so there are no absolutes.

But if I had to offer any advice to founders, it is to sell, sell, sell. We did it to some extent, but I wish we’d done it more aggressively because the best type of funding is from customers.  It shows your product is something they want and is the ultimate validation of what you’re doing.  Too many folks mistake raising money from investors and giving away equity as validation. It may not be.

I highly recommend CB Insights; what you’ll learn will provide high ROI for the time you spend. –Miki

I’ve been around startups since the late 1970s; long before dot com and software took over the spotlight.

And what I learned about VCs back then was different from VCs now.

Back them, most VCs were guys who had started or helped start companies, with strong operational, not just technical, and strategic background.

Sad to say, most VCs with under 25 years experience often don’t know what they’re doing, because they have never created/built a company, while the rest are just bankers masquerading as VCs following “sure bets.”  

Granted, VCs have always had much in common with lemmings, preferring to fund “me, too,” companies, as opposed to earth-shattering, high risk products/services that actually moved society in new directions.

From my perch back then on the edge of the VC ecosystem I watched as the “names on the door” retired and were replaced by Wall Street wunderkinds, whose only skill was manipulating money.

What didn’t change was their lemming-like, follow-the-leader investment strategy.

Things haven’t improved much.

While more partners and  “names on the door” have operational experience, the investment ecosystem is more closed-door incestuous than ever before.

So unless you are one of the mostly white, mostly male, right school, strongly connected, entitled few, start your company with a bootstrap mentality from the beginning — not as a fallback contingency.

Waiting for funding is like asking for permission.

Flickr image credit: billsoPHOTO

A Friday series exploring Startups and the people who make them go. Read all If the Shoe Fits posts here

Yesterday we looked at the bootstrapped success of Tuft & Needle and before that at bootstrapping serial entrepreneur Andrew Wilkinson.

All very successful sans venture money.

Sure, thousands of bootstrapped companies fail, as do hundreds of funded companies; some go with a bang and others with barely a whimper.

But a few provide a cautionary tale for both founders and investors.

Lucas Duplan’s Clinkle is one such tale

Clinkle was supposed to be what Apple Pay is today.

In what is termed a “party round” 22 year-old Duplan raised $25 million dollars, mostly in convertible notes, from high profile investors, including Richard Branson, Peter Thiel and Marc Benioff, as well as VCs Accel Partners, Index Ventures and Andreessen Horowitz.

“In a typical party round, no single investor cares enough to think about the company multiple times a day,” wrote Y Combinator President Sam Altman in a June 2013 blog post. “Each investor assumes that at least 1 of the N other investors will be closely involved, but in fact no one is, and the companies sometimes wander off into a very unfocused wilderness.”

However, in the 5 years since founding, 3 since funding, the company has done nothing, gone nowhere and in an almost unheard of action investors are asking for their money back.

Clinkle had a polished demo that came before things like Apple Pay, said one former employee, who declined to be named. But most importantly that person added, Duplan “was charismatic when he wanted to be” and could “raise money in absurd abundance.”

“It was his one skill,” they said. (Emphasis mine.)

The takeaway is beware of great stories, charm and party rounds where the person at the helm has never sailed a boat.

Knowing the correct names of the equipment doesn’t mean a person knows how to use it in the real world or in what order.

Image credit: HikingArtist

You hear it all the time, “build a product that solves your own problem.”

That’s exactly what JT Marino and Daehee Park, both software engineers, did when they quit their jobs to create mattress company Tuft & Needle, seeding it with $3000 from each each of them.

They didn’t take venture money because they wanted to build the company for the long term and borrowed the money they needed to grow.

“The reason why we turned them down all those times is because we figured it would change the way we operate as a company.”

Instead, Marino, 30, and Park, 27, took out a $500,000 loan, at a rate of 10%, from Bond Street, one of the new breed of alternative lenders, in order to keep control of the company and continue doing things their own way.

They built the business online — no showrooms and no salespeople.

No hassles returning a mattress you hate. And, perhaps most important, no gimmicks on prices, which range from $350 for a twin to $750 for a king.

They’ve considered other products, even developed a few, but with no investors to force them to expand, they are focusing on the mattress business.

Is it paying off? Absolutely, so no problem meeting their loan payments.

By its first year in business, Tuft & Needle had reached $1 million in revenues. And then it just kept growing, hitting $9 million in 2014, then $42 million in 2015. This year, Marino and Park expect revenues to reach between $125 million and $225 million, a three- to five-fold increase over last year. And, yes, it’s profitable.

However, recognizing that not everyone, especially older buyers, are comfortable buying a mattress online, they are opening their first retail store at 637 King Street in San Francisco (where else?) — first and possibly last.

“It could very well be our first and last store, or it could be the first of many,” Marino says.

That’s the priceless reward for bootstrapping.

Call your own shots, experiment as you choose and stay true to your values.

Image credit: Tuft & Needle

There is so much noise these days about how to build companies, especially in the technology industry.  Each time building companies is mentioned, venture capital figures prominently, and it seems as if it is impossible to create great companies without VCs.

I live in the greater Silicon Valley and am an entrepreneur who has started several companies, some successful.  I started my first company while living in Scandinavia, together with a friend from graduate school and a work-mate of his.  After the introduction and decision to start the company, we very quickly got down to starting to architect the product – a phase that I had very little understanding of as I wasn’t particularly interested in computers at that time.  As they were defining the features and building the architectural framework, I was largely left on my own and wondered what my role in creating the company was.

The two gentlemen in question were both technologist and computer programmers, and very bright.  I, however, was more of a jack-of-all-trades who had studied several subjects, traveled widely and had too many interests.  In short, I didn’t know what I wanted to do when I grew up.

All of us had left our jobs and were focusing on our startup – working literally day and night.  Or at least they were – I had no idea what I should be doing so I did a lot of coffee making and getting pizza.

Once we had an understanding of what the product would be and had programmed a VERY light prototype, we immediately tried to get projects where we could use the skeleton we had created to garner revenue.  The reason for this was not because we understood the Lean Startup methodology, but simply that we were in an area where there was no venture capital available, and especially not for software startups that had no inventory or fixed assets.

It was very difficult to get our first couple of customers and we had to lean heavily on our relationships as they were purchasing something that didn’t exist.  We made it, however, and managed to grow the business to around 200 employees before exiting.

The reason I’m telling you this story is because I now reside and work in an area that has hundreds of venture capital funds, angel investors and ecosystems devoted to entrepreneurial activity.  Yet, I’m not sure that it’s a good environment for launching a company. 

There is a consequence of having access to capital, and that is that there is less of a need to truly align oneself with what the customer actually needs until much later in the process.  One can have a good idea, raise capital to execute on the idea and create a viable product without ever having to interact with a real customer willing to pay full price for the product.  This leads to misalignment with customers, missed product-market fit and expensive pivots. 

This means that a non-trivial amount of the allocated capital is wasted within the startup ecosystem.  I’m not sure, but it may actually be good to start a company in a cash constrained environment – though the experience is actually so tough that it defies description.

The Stanford Summit is exciting; a marvelous opportunity to catch up with people you know and to make new contacts. Obviously, the economy was a major topic of conversation.

Lorenzo Carver, CEO of Liquid Scenarios, and I sat down for a conversation regarding the positive and negative experience we have both had bootstrapping our companies during the past few years.

We both, after extensive experience sitting on the venture capital, investment banking and entrepreneurial sides of the table, chose to bootstrap our companies through product development and product launch.

I first met Lorenzo at last year’s AlwaysOn Stanford Summit and met him again at this year’s Summit.  It was a pleasure seeing him again as we have both moved forward strongly during the difficult economic environment.  Lorenzo has had a varied career advising companies, developing strategy and assisting in raising capital.  He has raised several billion dollars for his and other’s ventures during his career.

Also my ventures, EMANIO and the M3 Foundation, have developed well during the recession despite strict fiscal discipline.  Or maybe thanks to it.

As I spoke with Lorenzo, he mentioned that bootstrapping is “a double edged sword; companies that are bootstrapped need to have customers and serve customers in order to survive”.

In other words, the order of business for bootstrapped companies is business.  Making money is the order of the game.  In contrast to VC funded companies, bootstrapped companies quickly have to find their way to revenue and profits.  All investment in product or market development is coming from revenue and profits, so acquiring these are the core responsibilities of the CEO and the rest of the management team.

Lorenzo continued, “Companies that have financing when things get tough have more options, but often lack the strong teams and lack control in how to keep the team together when things get tough”.  In other words, the act of bootstrapping builds a certain discipline in a team.  Everyone is aware of the fact that their livelihoods are dependent on getting that revenue and profit.  Costs have to be kept low and sales have to get done.

Well financed companies most often lack that discipline and there is tremendous waste in a lot of VC funded companies.  However, they also are able to do more and grab opportunities that bootstrapped companies are unable to act upon because of a lack of resources or the need to stay profitable.

We were both in agreement with the fact that everyone we had worked with was in a similar situation to the one we found ourselves in.  The business environment turned toxic overnight and fourth quarter last year and first quarter this year were horrendous for everyone we had spoken to, including partners and customers.

There is no question that there will be more bootstrapping as companies are having difficulty finding investment capital or lenders.  This, in turn, will bring greater scrutiny of budgets and purchase orders across the spectrum.  We both believe, though Lorenzo is more optimistic than I am, that bankruptcies will continue to grow and that the business environment will continue to be difficult for years to come.

However, there are few times better to grow a company than during difficult times.  Many of the great companies of today were started during difficult economic environments, had difficulty finding capital and had to find innovative ways of growing.  This developed their corporate cultures to be strong and focused toward creating great value propositions with scant resources.

To any budding entrepreneurs out there, this is the time to truly consider your dreams and take the step.

KG Charles-Harris is CEO of Emanio and a special contributor to MAPping Company Success.