Why I Waited 10 Years Before Taking VC Funding

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Twelve years ago, I was in the subway in New York City carrying more than anyone should ever carry on the subway in New York City. I was heading to my first trade show and couldn’t afford a cab so was lugging around both my luggage and a borrowed trade show booth. The only reason I was even able to go to the show was because I had bartered a license for my company’s survey software in exchange for booth space. On the subway, I could barely hold my things, and making it up the stairs was a sight to be seen. I had no money. I had no funding. If I was going to turn this idea into a real business, I just had to find a way to make it happen.

To this day, every time I go to New York and pass that subway spot, I think of myself 12 years ago and the scrappiness it took to make things work at the beginning. It’s not just a memory of my early days as a founder; it’s a source of motivation I’ve relied on over the years. The trade show is one of hundreds of experiences that shaped my company — and me — during a decade-long bootstrapping period. Every founder needs that. Every founder should bootstrap. It changes the way you run your business and it changes you as a leader.

While raising venture capital money has gotten a little harder in the past few months, it’s still relatively easy (in historical terms) and money has been pouring in to startups over the past several years. That’s made bootstrapping seem like either a quaint idea or as something founders do solely for the purpose of maintaining equity. While retaining control and leverage in the company are good reasons to bootstrap, there’s a much more compelling reason: there is no better way to develop the resourcefulness and resilience, the scrappiness, required for a founder to be able to grow with the company. That’s because growth is about making constant trade-offs. When you bootstrap, scaling becomes easier because it forces you to get good at making trade-offs early.

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Every founder dreams of growing an international empire from a seed that started in a garage (or, in Qualtrics’ case, a basement). There are philosophical blueprints for founders growing with their companies, especially in technology. Prominent VCs are on record preferring founding CEOs, but the truth is if a founder doesn’t scale with the business, either the company wilts or it is handed to someone else.

The company I run today is a far cry from the one I was operating out of my family’s basement in the early 2000s. We now have more than 1,000 employees at a half-dozen global offices, and we serve 8,500 customers in over 90 countries. But there were a lot of inflection points along the way, and each one helped me build the muscle I needed to take the company to the next level. When you take VC funding too early, you skip those steps and don’t build those muscles because you didn’t learn to how to make hard tradeoffs. Working with limited resources compels focus and fine-tunes problem solving. Plus, by the time you are ready to take funding, you can have your pick of the partners you want to have join you on your ride.

Bootstrapping also adds runway for a company so it can make good decisions without unnecessary pressure. As has been welldocumented, too many companies are sitting on artificial valuations driven skyward solely by how much money they’ve raised. Now, these companies face a harsh reality: they can’t go public because they aren’t producing cash, and they can’t be acquired because they’re overvalued. Many of these companies raised money too quickly and, as a result of skipping steps, they’re now faced with choosing from a short list of bad options.


In contrast, companies that bootstrap can control their own destinies. In 2012, 10 years after I cofounded Qualtrics, I had the opportunity to sell for $500 million. Or I could have just kept going the direction I already was. Instead I chose to bet on myself and the company, because I wanted to continue writing my own story. We decided to take $70 million from Accel and Sequoia. We had the option to choose our partners and they have been amazing. For founders with eyes on the long game, there’s nothing more important than having options.

Ultimately, choosing to take VC money was the right choice for us because we weren’t using it as a lifeline. We had already nailed our model. That money and the additional $150 million we later raised was used simply to scale a business we already knew how to run. We accepted the money on our terms and entered into a true partnership with our backers. Before term sheets were signed, there was already a mutual respect and implicit trust because my VC partners had seen that we had done very well on our own.

Today, as the unicorn drama continues to unfold, it’s not about who took funding and what their valuation is, it’s more about who limited their own runway by when they went to the VC well, because the real questions is not if you go to the well, it’s when you go. Companies that went to the VC trough too early and often face fewer options and have less runway. As the VC pipeline contracts under economic pressure, it’s a good time for a renaissance in bootstrapping. Founders, and the companies they grow, will be better for it.

Ryan Smith is CEO and cofounder of Qualtrics.

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