By Gregg Scoresby, CEO CampusLogic
The founder of an early stage company recently asked me, “Should I raise venture capital or should I bootstrap?” Without hesitation, I said, “Absolutely!”
The answer to that question is, of course, almost never binary.
Capital Raising Isn’t One-Size-Fits-All
There is a lot to consider in funding an early stage company. Things like cost to build product, market size, founder commitment to scale, team experience, product market fit, momentum, sales cycle, the ability to generate return for investors; all are impactful on a company’s capital requirements.
Definitive statements like, “Every startup should bootstrap,” or “Every successful company that scales raises outside capital,” don’t work. There are countless exceptions on both sides of that argument.
Since starting CampusLogic in 2011, this is something I have thought a lot about.
Capital Raising: Our Unique Path
CampusLogic is one of the most well-funded Arizona companies in the last couple of years. In early March 2017, we announced a $10 million Series B equity financing. In 2015, we completed a $7.5 million Series A equity financing. But prior to 2014, CampusLogic was entirely bootstrapped, mostly because nobody was interested in what we were doing back then.
That bootstrapping experience was incredibly hard. I had to sell almost everything I owned to keep the lights on at CampusLogic—and our future was totally uncertain. Looking back on those hard days and sleepless nights, I am truly thankful for those formative bootstrapping years at CampusLogic. The experience strengthened our discipline and focus, elements every successful company needs. Granted, it also made me paranoid about running out of cash—a feeling still with me today.
3 Questions Early Stage Software or Tech Companies Should Ask
In 2014, it became clear to me that to scale, we would need outside capital. Three questions drove me to this conclusion. I think those questions are largely applicable to most early stage companies:
How complex is our product?
The CampusLogic product is relatively complex and solves big problems for schools and students. We deal with sensitive student data and integration requirements with multiple systems already in place at colleges and universities. Our sales cycle is typically three to six months long, involving security reviews and integration planning. Onboarding customers usually takes 30-45 days including integration to student information systems, single sign-on enablement, and transforming the student experience. For enterprise software companies like CampusLogic, these things need to be fully baked before going live with a single paying customer. And that is expensive.
How much domain expertise do we need?
CampusLogic has created a category we call student financial aid engagement. We address problems associated with student confusion, lack of cost transparency, over-borrowing, and equal access to education. I first started in student financial aid over 20 years ago. My entire leadership team has extensive experience in their functional area, and most of them have dedicated a significant chunk of their careers to the higher education industry. I also recruited several members of the team from out of state and asked them to relocate to join the team. I believe almost every successful vertical or industry-specific software company has relatively deep industry expertise at most levels of the organization. And that is expensive.
How big is our vision?
The CampusLogic purpose is to “Help schools change lives.” We do this by making the student financial aid experience mobile, simple, and personalized. But I didn’t start this company so we could help just a few colleges and universities. I want to help all colleges and universities give all prospective students, all current students, and all alumni the tools needed to increase access to education and reduce student borrowing, all while driving down the cost of administration. This means a big product development and software engineering team, a seasoned sales and marketing team, and the very best customer support schools have ever experienced. And that is expensive.
Outside Funding Drives Results
With the help of outside capital, CampusLogic has made and continues to make substantial investments in people and products. These investments enabled us to scale quickly, growing over 300% in 2016. We expect similar results in 2017. More than 400 colleges and universities are using the CampusLogic student financial aid engagement platform—up from four customers in 2014. We started with one product in 2014 and will soon release our fifth product, ScholarshipUniverse.
None of this would have been possible without outside funding.
To be clear, I am a big fan of bootstrapping for as long as possible. It drives focus and discipline while you build the foundation of your business. But if your company is solving big and complex problems, requires domain expertise at all levels of your organization, and you have aspirations to go big and change the world, raising outside capital is probably needed because those things are expensive.
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