“F*** off french motherf*****”: the email that changed my life

You want to build a successful SaaS business?

Well, you’ll need expensive developers, a sales team, a marketing team, and also some customer support, without forgetting operations, financial and HR...

In any case, it’s gonna cost you a LOT of money.

To do so, you absolutely need to raise funds.

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That’s what everyone told me 5 years ago when I started my SaaS company.

Yet with only a $1000 investment, I built a $150M business, reached $20M in ARR, sold 20% of my company, and acquired 2 other SaaS.

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Here’s the truth no one wants you to know: 7 out of 10 businesses that raise funds fail.

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The only success stories people see are about how much some companies are getting in funding…

But we never see the ones that fail (because, yes, many of them end up crashing.)

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I’m not gonna lie, I did try to raise funds at first

I spent hours pitching my product to 10s of VCs… only to get rejected every single time.

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And this one rejection message still hurts to this day:

So… you may think I’m a hater, and that’s why I’m telling you not to fundraise… and you’re probably right 😂

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But you’ll see later why I can talk about fundraising and that I’m not 100% against it.

Only under certain terms.

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Building a profitable SaaS business taught me one of the most important lessons a founder can learn:

You don’t need millions from investors to build a successful business.

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So in this article, I’m going to share with you 6 reasons why I think bootstrapping your SaaS business is the most realistic way to make it successful.

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“F*** off French motherf*****”: the email that changed my life.

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1. Profitability focus

The first thing is that you’ll be focused on profitability.

When bootstrapping a business, you’ll have no other choice than to focus on what matters: making money.

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And to do so, you’ll need to develop what I call your “Minimal Viable Skillset” (or MVS).

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What does that mean?

When you don’t have money, you can’t recruit anyone. This means that you’ll have to do sales, marketing, support, etc., all by yourself.

And this will teach you a lot about how to run a business.

But, most importantly, you’ll learn to focus on your customers’ problems.

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Here’s an example:

If you’re the best carpenter in the world but don’t know how to find clients… you won’t make much money.

But if you’re a good enough carpenter and you also know some basics in sales and marketing, you have way more chances to get clients and make money.

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I’ve invested in 10+ companies, and if there’s one thing that really pisses me off, is when I see founders hiring people in sales and marketing in order to figure out how to grow their businesses.

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But here’s the truth: no one will ever do that for you.

And do you know why?

Because this is supposed to be YOUR ROLE as a founder.

How do you think you’re gonna be able to evaluate the skills of someone, if you’ve never done it yourself?

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When you run a profitable company, you have no other choice than to build your Minimal Viable Skillset before you can actually hire people.

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Let me give you a typical example of how an unprofitable VC-backed company works:

Between 2011 and 2019, WeWork, a provider of coworking spaces, raised billions of dollars, opened hundreds of offices all over the world, and recruited thousands of employees.

And since the company reached a $47B valuation in less than 10 years, everyone saw it as a huge success.

Yet, a few years later, they spent all of their investors’ money without making enough cash to become profitable.

And went from a $47B valuation to being bankrupt in just a few years.

That’s why you shouldn’t be fooled by how much a company shines when they raise money.

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When you start with $0, if the things you invest in are not bringing cash… your business will die.

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So how do you become profitable?

When I started lemlist back in 2018, I had no money… so I needed to reach profitability as quickly as possible.

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The first thing I did was validate my idea to know whether or not I should keep working on it.

And to validate the idea, I had to find paying users as soon as possible.

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Reid Hoffman once said, “If you’re not embarrassed by the first version of your product, you’ve launched too late.”

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And since this was exactly how I felt with the first version of lemlist…

I decided to launch it on Product Hunt - the best community in the world to discover new tech products.

Even though lemlist wasn’t the best product out there yet, people loved the idea… allowing my tool to be #1 product of the day.

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What made the difference?

Most people doing cold outreach send very generic emails that don’t build trust, and end up with low reply rates to their emails.

And since there wasn’t a single good personalization tool on the market…

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I created for those people a brand new solution to differentiate themselves in the sales industry and increase their meeting booked rate: the first outreach email platform that creates personalized images automatically.

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Launching on Product Hunt is one of the easiest ways to get ahead of your competitors because you’ll:

• validate your idea quickly,
• get hundreds of beta testers,
• get feedback on how you can improve your product.

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Then, I knew I had to build trust with other people in my niche.

Unlike most people think, you don’t need paid ads or influencers to grow an audience.

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Here’s what I did to gather an audience of thousands of people:

• I built my personal brand around cold outreach on LinkedIn
• I grew a Facebook community for cold emailing experts in which I gave lots of value

• I joined dozens of other communities related to my expertise

And this helped me:

• get more people to trust me
• get noticed in my industry
• get more users to buy my product… hence generating more revenue

… all for free.

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If you want to know more about how to grow an audience that trusts you, check out this video I made on the subject!

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2. Flexibility and freedom

The second reason is that one of the biggest advantages of bootstrapping is the freedom you have as a founder.

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Most people think that once VCs invest money in their business, they’ll be able to do whatever they want with it.

The reality is that by giving you money, they expect a return anywhere between 2 to 100 times their investment.

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For example, if you take a $20M investment at a $100M valuation, with a business at $10M in ARR; here are some examples of what an investor would expect of cash return:

between $40M if they 2x their investment… and $2B if they 100x it.

Let me give you an example of something I was able to achieve being bootstrapped:

In 2019, while my main product lemlist was growing at 30% month over month, I decided to start a side project: lempod.

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We built the product in 3 days and gained over 100 users in one week.

And people were loving it.

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Yet, everyone told me that I should stay focused on growing lemlist.

But I kept growing this product with very few resources because I knew it was helping some people out.

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18 months later, as it crossed $600k in ARR, I decided to sell it.

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3. Full Control

Which brings me to my next reason:

From the moment you raise funds, you lose full control over your company.

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Let me explain:

Your company is like a cake.

At first, you have the whole cake.

When you raise funds, you’ll give the investor a piece of the cake in exchange for more money to cook a bigger cake.

But since the cake is not 100% yours anymore, you won’t be the only one to make decisions on how to cook it.

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But why losing full control over your company is a problem?

Well… people tend to raise too soon or with the wrong investors… which often leads to: down rounds, massive layoffs, bad exits, or even worse, bankruptcy.

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Let me give you an example:

Rand Fishkin had the opportunity to sell his previous company Moz for millions to Hubspot.

He really wanted it to happen and was all in on it!

But it never happened…

His investors had voting rights to block the sale, which they did.

Because they believed that they could get a much bigger exit later down the road.

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But a few years later, Rand decided to leave the company he had built for years. He ended up with nothing… and so did the investors.

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Raising funds is often seen as the holy grail.

Yet, it can also make you lose everything you’ve worked for.

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4. Raising money will cost you a lot

Next, raising capital for your business will cost you much more than you think.

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Most founders underestimate the time, resources, and commitment it takes to complete a round.

Raising funds isn’t just about pitching your product and taking the money of the first VC you meet.

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It’s a long and distracting process that will prevent you from focusing on your business’ growth.

And to me, that’s one of the most dangerous decisions a founder can make.

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Here’s why:

Over the years I’ve spent helping other entrepreneurs build their businesses, I’ve seen a lot of them spend months trying to raise money.

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Most of them took 6 months to raise a few hundred of thousand to fuel the growth of their business.

But I’ve also seen some of them fail their funding round and end up with no money after 1 year of trying to fundraise.

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In both cases, very few founders were focused on what truly mattered: growing their business.

While they got a bit of money… they also lost a lot of time.

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And in the meanwhile, bootstrapped founders were solely focused on growing profitable businesses.

I know for sure that I would never have reached $250K in ARR in a year if I had spent all my time raising funds…

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So in my opinion, fundraising is a really bad calculation.

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As Tony Hsieh once said, “Sometimes the best investments are the ones you don’t make.”

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I’m convinced that you can bring 10 times more value to your users if you focus on growing your business all by yourself.

And now, let’s see why growing your business all by yourself can also be very advantageous for you as a founder… (yes, i’m gonna talk about money 💰)

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5. Leverage in negotiations

Bootstrapping will be your unfair advantage in business negotiations.

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What most people don’t know is that by growing a profitable business 100% bootstrapped, you’ll have much more chance to get a higher valuation… either for an IPO, a sale, or a funding round.

Because if investors see that you were able to grow a profitable business with nothing, they’ll trust you to turn their money into even more cash.

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That’s how I became a multi-millionaire at 30 years old.

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Here’s how:

I’ve been documenting my journey from the early days of lemlist.

And once we crossed $6m in ARR - I started to receive even more messages from VCs.

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And one of them got my attention:

Oliver and David, two managing partners from Expedition Growth Capital, were offering me $30M in cash out in exchange for 20% of the company.

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But, what’s the difference between classic fundraising (or cash-in), and a secondary (or cash-out)?

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In the case of classic fundraising, the investor’s money will be used to fuel the growth of the business.

The money will go to the company’s bank account, and the investors will have power over the decisions taken for the company.

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In the case of a secondary, I decided to sell shares of my business to investors and the money ended up in my personal bank account.

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Now that you know the difference let me tell you why I said yes to their offer:

When I received Oliver’s first mail, I got really impressed: he had made an in-depth presentation of lemlist, spotted some opportunities, and gathered some users’ testimonials.

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This is something I had never seen a VC did, and it proved me that they cared about what I did.

And more importantly, their VC firm is mainly investing in profitable and bootstrapped businesses

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6. Over-valuation risk

My last reason is that in 99% of cases, the valuation you’ll get from raising funds doesn’t represent the real value of your business.

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The problem is, most people are focused on the big numbers and convince themselves that it’s their business worth.

In reality, it doesn’t work that way.

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Here’s the thing:

You have multiple ways of getting a valuation:

• doing an IPO (initial public offering)
• selling your company
• selling some shares of your company
• raising funds

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In the 3 first three situations, the valuation you’ll get is the real value of your business.

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And the valuation of a SaaS depends on many parameters…

• its revenue
• its year-over-year growth rate
• its industry
• its market
• its retention or churn
• its average customer value…

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But if you take most public SaaS companies, they’re valued anywhere between 5x and 15x their annual revenue.

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For example, Hubspot, a public tech company that did an IPO in 2014, is at around $2B in revenue for a valuation of $27B.

Meaning 13.5x its current ARR.

Another example is selling shares of the company.

That’s what I did with lempire in 2021, I sold 20% of the company for $30M and got valued at $150M. In that case, that valuation is close to the real value of my business.

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But in the case of fundraising, the valuation a business gets can be up to 100 times its ARR.

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What’s the big deal, you might ask?

When you get such a high valuation, you put yourself in a really bad spot.

Because that doesn’t represent how much your company is actually worth… That’s how much the investors think it will be worth if you spend their money the right way.

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Let me explain: when investing money into a business, most investors ask for what we call “preferred shares.”

Basically it means that if the company is sold, the investors will be the first to get their money.

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Let me give you an example of how investors protect their investments with preferred shares.

Imagine a tech business raises $100M in capital at a $500M valuation with an actual revenue of $10M.

The investors expect to get between 2x and 100x what they invested.

Meaning between $200M and $10B… out of a $10M company.

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Like most companies raising such amounts, they might not be able to grow as expected.

Let’s say that after a few years, their revenue reaches $15M, and they decide to sell.

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Based on the factors I exposed above (revenue, yoy growth, and industry), they will sell for anywhere between $60M to $100M.

Now, let’s consider that you are the founder of that company and that you own 80% of it.

You might think that if you sell your company for $100M, you’ll get $80M.

In reality, you will get $0.

Because here, the investors will issue the preferred shares in order to get back the money they invested in your company.

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And if we consider that 7 out of 10 startups that raised funds fail, this is something that happens more often than you can imagine.

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I cannot stress it enough: as a founder, time is your biggest asset.

Not money.

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Here’s why:

Have you ever heard of the opportunity cost?

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Basically, it works that way:

The opportunity cost represents the potential benefits someone misses out on when making a choice over another.

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Here’s an example:

You have $100 and with it you can either:

1- spend $100 at a nightclub.

2- invest $100 with a 5% return.

In one case, you lose $100, in the other one, you gain $5.

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If you chose to party, the opportunity would have cost you $105.

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In the case of building a business, you invest your time and the time of others.

And as Jim Rohn once said, “Time is more valuable than money. You can get more money, but you cannot get more time.”

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So what’s the opportunity cost when building a business?

Since you cannot get more time, it means that you need to focus on the path that maximizes your chances of success.

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Yet, when raising funds, you increase the chances of failure as 7 out of 10 startups that raise funds will fail AND on top of it, because you have investors, you might never get any money from an exit.

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When you bootstrap you are a lot more in control and can maximize the exit output.

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What did you learn today?

1. Bootstrapping a business is the best way to make sure it’s a success because you’ll:

• have to generate profit as quickly as possible
• work on what you love
• keep full control of your company
• have all the time you want to grow your business

2. A fundraising valuation doesn’t represent the real value of your business

3. Bootstrapping a profitable business is the most unfair advantage you can have over others

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And the most important lesson is that you don’t need funds to build a successful company.

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I hope I’ll see you soon,

Peace, love & profit 💰