Why we decided to raise money at Get on Board

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If you've been keeping up with Get on Board for a while now, you may remember a talk I've been presenting for a few years now at various conferences, entitled 'Emprendiendo al revés' (Entrepreneurship: starting backward). The talk discusses the typical advice entrepreneurs are often given when they're just starting out, which we - proudly - did not follow.

And (in its original version) one section was as follows:

Ignored advice #3: 'Raise investment as soon as you can' | Not. Raising capital is not a triumph, it means contracting debt. And you'll pay not only with % of your company, but your autonomy.
Well... it turns out that we closed a $600K investment round for Get on Board. And very soon we're going to go for more.

What happened? At what point did we change our minds?

Did we really change our minds?

In this article, I am going to leave a couple of ideas that may be useful for other founders questioning whether or not to raise money, especially in Latin America, where venture capital, although growing, is still scarce.

Very few technology startups need to raise money to get started.

This needs to be repeated because sometimes it seems that having some investment is the only way to run a startup. Yet stories like Mailchimp, Basecamp, 1Password, and even GitHub show that it is perfectly possible to start a startup without any capital at all.

Forcing yourself that the only money you see is from your first customers will keep you focused on the right thing: creating a product that works and solves a problem.

What's more, I'm convinced that starting a startup without outside capital is the best way to go. Forcing yourself that the only money you see is from your first customers will keep you focused on the right thing: creating a product that works and solves a problem. This monetary restriction has the additional benefit of making it difficult for you to dedicate yourself full-time from the beginning, so you will have time to mature and pivot the idea, the market, and the target before jumping into the pool.

There are very few ventures that really need to start with money raised - such as those that have a very high R&D or scientific research factor. The keyword here is to start. GitHub and 1Password started totally bootstrapped but ended up raising a lot of money (and in the case of GitHub, being bought for a lot more). Get on Board started, and stayed for a few years, without raising any money.

So, and then?

And here comes the central message of this post. If you don't have time to read this whole article, please read the section below.

The Venture Capital path is optimized to create technology giants.

There are many things about the VC path that don't make much sense within traditional business logic:

  • Focusing on growing and gaining traction - even if it means burning money madly - far above having a "profitable business" from the outset.
  • The pressure to periodically raise new rounds, bigger and bigger, and have an exit in 7-12 years' time
    Looking for impossibly huge markets
  • All of these things are very bad advice for 99% of businesses. That said, it makes no sense for you to go the VC route if your business is in that 99%. The crazy, silver-filled growth dynamic of Venture Capital is the dynamic that creates the Facebooks, Googles and Amazons of the world. It's a dynamic optimized to create tech giants that take over equally huge markets.

Here's what many entrepreneurs in tech (and more than one VC, for that matter) have a hard time accepting: the VC route isn't right for "just any kind of tech startup" with moderate projections and a small market.

Venture Capital is a dynamic optimized for creating tech giants that take over equally huge markets.

Can you find VC funds that invest in tech startups with moderate projections? Sure. Tons! (The typical VC tends to be more risk-averse than the word "venture" suggests.) But sooner or later, something's not going to be a fit:

  • You're going to feel yourself artificially enlarging your TAM just to make your pitch look pretty to investors;
  • You will feel the pressure to burn more money than seems sensible, to triple the team that you worked so hard to build and that was running like clockwork, or to accumulate data in a frenzy because it is the only way to have an exit;
  • You are going to ask yourself who told you to sacrifice product and service quality just to get into that giant market you didn't even want to get into in the first place;
  • You're going to find yourself having to negotiate a new round sooner than you would have liked, and with little leverage to negotiate with.
  • And so on.

Unfortunately, most startups seeking capital are ventures that, as valuable as they are, have no chance of becoming a giant or bringing outsized returns to their investors. And that's okay. No problem. Many of them deserve to exist and they solve real problems. And they can become very prosperous businesses. But they would suffer a lot less (and their founders would probably prosper even more) if they had accepted that Venture Capital was not made for them.


Venture Capital = Rocket Fuel ⛽️ 🚀

The best way to understand whether raising money is for you or not is to assume that such an investment is equivalent to buying rocket fuel, as Mark Suster puts it. If you have a car or a bike, you obviously don't need rocket fuel. But if you have a rocket, you definitely need it to get it off the ground.

In this light, the question to be solved is simplified.

 Do you have a rocket, do you have a car, or do you have a bicycle? That is to say:

✅ Do you have a product launched and validated, with satisfied customers?
✅ Do you have a clear recipe for how to expand and continue to grow rapidly?
✅ Do you have a product that depends directly on getting network effects to add value?
✅ Do you have a giant, multi-billion dollar potential market?

If the answer to any of the above questions is "no", then you do NOT need Venture Capital. And I know that as a founder you will have the tendency to answer, "Of course I do, I need to grow fast!". But let's look at the case of MailChimp:

✅ MailChimp has a launched and validated product, with many very satisfied customers.
✅ MailChimp has a clear recipe on how to expand and keep growing.
✅ The email marketing market is on its way to being one of 20B.
❌ But MailChimp doesn't rely on critical mass to function, and it doesn't particularly benefit from network effects. What makes MailChimp grow and survive is not dominating markets, getting there before everyone else, or burning millions of dollars in price wars, but having a consistently better product. If MailChimp only had one customer, that customer would be just as satisfied as if MailChimp had a billion.
MailChimp, Basecamp, and many other products have this in common. And that's why they've been able to thrive without raising absolutely no capital.

Achieving critical mass quickly, with notable exceptions, requires being able to use resources quickly and intensively.

In the case of Get on Board:

✅ We have a product launched and validated, with customers who have been paying (and returning) for several years.
✅ We have a clear recipe on how to continue to grow (at least in the short/medium term).
✅ The tech recruiting market is giant and growing, and we have the potential to get a significant foothold in it.
✅ Most importantly, Get on Board, as a platform that connects companies and professionals, is strongly influenced by network effects. In a market where Get on Board has no jobs and no interested professionals, the value we add is close to zero. Our value depends directly on obtaining a critical mass of jobs and professionals in a relevant market. This, in turn, demands a lot of speed: getting network effects organically is extremely slow and you run the risk of never getting there.

The crucial decision to raise money in Get on Board was to realize that if we didn't accelerate the pace of growth, we would never realize the platform's potential on a regional and global level.

If you need critical mass, you want to raise money

Network effects mean that marketplaces and platforms that connect users with other users tend to need critical mass to function (if Despegar.com only had one airline and one passenger, it doesn't matter how well its software works, it won't add much value). Achieving critical mass quickly and being able to sustain it requires, with notable exceptions, being able to use resources quickly and intensively. Here, having capital - your own or someone else's - is practically essential.

In fact, the crucial decision to raise money for Get on Board was to realize that if we did not accelerate the pace of growth, we were never going to realize the platform's potential on a regional and global level. For Get on Board to add value, it needs to connect more people to more jobs. Having few jobs and few professionals doesn't work.

If you get into the scaling phase, you want to raise money.

I want to insist on the corollary of the above. If the product you are building does not require critical mass or does not benefit from network effects, you do NOT need to raise investment. Emphasis on "don't need": you can go ahead without outside investment, and if you don't want to give up % of your company, you can choose not to.

Very few businesses actually require critical mass or benefit from network effects (the vast majority only benefit from economies of scale, which is a linear effect). But there are other scenarios where even if you don't need capital, you can benefit from venture capital. Let's go back to the first two items on the checklist:

✅ Do you have a launched and validated product, with satisfied customers?
✅ Do you have a clear recipe on how to expand and continue to grow rapidly?

If these two are met, plus (1) you have revenue and (2) you have clear unit economics, then raising money can help you accelerate the expansion of your business into new markets in a sustainable way.

Having good unit economics is critical to effectively be sustainable, and thus understand exactly how and when you stop burning cash and go back to blue; otherwise, the only thing you will scale with VC will be a bad business (Uber, WeWork, etc.). The problem with rockets is that they go so fast that it's not easy to control them.

It is not enough to just want to raise money

All of the above explains why you, as a founder, might want to raise money. But the fact that it is convenient for you does not automatically make you a startup in which others want to invest.

It turns out that you must also comply with the following:

  • Be in a market of relevant and promising size, with at least regional (and hopefully global) expansion prospects. It is not simply to arrive and say "look, the global entertainment market is 2 trillion dollars, that's why you should invest in my card game". That's also why...
  • You must be able to demonstrate that your startup can take over a relevant part of that market... You will have to demonstrate impeccable traction and execution capability. Maybe the market is indeed attractive and your business model is the right one, but if you suck at execution and the user experience of your product is bad, VCs will conclude that they should bet their chips on your competition.
  • ...and quickly. If your plan is to grow harmoniously and steadily over a decade, I applaud you. But VCs aren't going to be interested. If you go out and buy rocket fuel, it's not going to be to go 90km/h. In that case, keep the car.
  • If you get into the VC dance, you have to dance the whole song. This implies having the willingness to give up a good portion of equity; to continue raising future rounds of capital; to think about an exit (either they buy you out or you do an IPO) 6-8 years from now where you bring returns hopefully of 10x the investment; to seat people on your board with veto power over key decisions, etc. And again: all these decisions only make sense if what you want to prepare is a giant.



Raising money without thinking about these things and then complaining that "interests are not aligned" will not make you look very good. Venture Capital is not a donation or an altruistic contribution to the venture.


Of course, there are good and bad investors, but with few exceptions, they are all looking for the same thing: a return of several multiples 6-8 years from now. And as I noted above, quite a few VCs (with the best intentions in the world) are looking for those returns in the wrong place, betting tiny chips on startups with limited projections and business models with little potential for scalability.

But that does not free you, dear founder, from having a clear understanding of how the machine works. I hope this post leaves you thinking about that.

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I recommend you to read the story of 1Password and their own reasons for abandoning bootstrapping.

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