Venture Scale ≠ Blitzscale

“Raising a seed round would have been a huge mistake for us”.

These words stopped me in my tracks. Here was a wildly successful founder at the helm of a business most can only dream to have built panning the path that most are marching.

They continued.

“If we’d have raised a seed round we would have been focused on the markets and milestones that investors needed to see and not on the needs of our customers.”

Despite going on to raise hundreds of millions of dollars from top tier VCs and ultimately selling to SAP for $8B+, the years Qulatrics spent focused on growing profitably vs. focused on fundraising provides a blueprint for a different path to building a venture scale business.

They started with a small niche (survey software for academics) then, profitably, moved into a larger adjacent niche of surveying customers of SMBs. When the enterprise opportunity became clearer, they were in a position to raise their first round of financing on incredibly attractive terms from two top firms with a pretty epic headline.

Had they raised a seed round, the focus would have quickly shifted to the more fundable enterprise opportunity even though that opportunity didn’t yet exist. There was a value to profitably scaling in the smaller niches that an early focus on funding would never have helped them unlock.

And they aren’t alone. There are countless others OGs like them including Github, Atlassian, Mailchimp, and Spanx and new a guard like Calendly, Zapier, Webflow and Notion all with a focus on early profitable growth. Having spoken to many of these founders and CEOs, none would trade that early foundation of customer needs and profitable growth they were built upon.

This strong foundation stands in contrast to the Blitzscaling playbook we’ve engineered our entire startup ecosystem around. We optimize our blogposts, livestreams, and tweetstorms around how to raise as much money as possible as quickly as possible. Rather than a solid foundation, Blitzscaling is oft described as “throwing yourself off a cliff and assembling your airplane on the way down”

And the results of that model reflect it, with around .1% of companies who raise venture capital ever actually achieving venture scale.

Source OATV Fund V Preview Site (pw: 2020)

Clearly, Blitzscaling is a viable blueprint for a select few to follow to grow their business and ultimately reach venture scale. But, it isn’t the only viable path, nor is it the only one we should orient our startup ecosystem around.

As Qualtircs’ experience and outcome demonstrate, not raising and burning piles of money doesn’t have to be a scarlet letter for the unfundable; rather, removing the distractions that come with the fundraising treadmill can be a superpower for many to reach venture scale without the pressure to Blitzscale.

That’s what we’re building with Indie.vc.

An investment approach and community of like-minded founders building venture scale businesses with a focus on ownership, optionality, and profitable growth.

If this resonates with you, our v5 applications open tomorrow.

VC, Dad