For many small business owners, bootstrapping or self-funding their operation offers more money and flexibility. However, it does come with certain challenges. One this episode, Gene Marks and Brian de Haaf, CEO and Co-Founder of Aha!, talk about bootstrapping and the advice they have for others that want to pursue this strategy. They’ll walk you through setting goals that can get you started.
Podcast Key Highlights
What Led Aha! To Be Funded by Bootstrapping and Not Outside Funding?
- Brian and his co-founder found themselves focusing on building a business that was better for people and not necessarily on telling a story for bankers.
- Software businesses are not as costly to start as other business, which allowed bootstrapping to be an option.
- Brian and his co-founder were both software builders in small and large companies. This gave them experience working in problem areas that they were trying to solve. It gave them a point of view about how those challenges could be addressed.
What Are the Pros of Bootstrapping a Business vs. Bringing in Outside Capital?
- Bootstrapping gives you motivation, flexibility and options.
- When the money is yours, it drives a sense or urgency and accountability. It drives a different mentality.
- Bootstrapping allows you to decide what is important and where money should be spent.
What Are the Cons of Bootstrapping a Business vs. Bringing in Outside Capital?
- Bootstrapping isn’t always a good option for businesses with higher costs.
- Sometimes you may need external expertise in areas that you don’t have. The right investors can bring that additional expertise to an organization.
What Are Tips for Using Bootstrapping Instead of Outside Capital to Fund a Business?
- Use your goals as a framework for success. Goals help you know what you’re aiming for. Each time you spend money, make sure it aligns with your goals first.
- Bring people in that want to contribute to your set of goals.
- People who are aligned create a lot of value.
- Look for people that are performance oriented and kind at the same time.
- As you build more success, always go back to your origin story and goals to make sure new opportunities are aligning.
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Transcript
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Gene: Welcome to The Small Biz Ahead podcast. We interview great experts, but offer advice and tips to help you run your business better. Hey everybody, it’s Gene Marks, and welcome back to another episode of the Hartford Small Biz Ahead podcast. Thanks so much for joining us today. I have Brian de Haaff. Brian is the co-founder and CEO of Aha! Brian, first of all, thank you so much for joining me. I know we’re talking to you. You’re all the way over in Northern California right now, so we’ve got a little bit of a time difference, but thank you so much for joining me. Tell us a little bit about Aha! And what the company does.
Brian: Yeah. Awesome. Well, thanks a lot for having me. So it’s really a terrific time to be talking to you because we just celebrated our 10-year anniversary or Aha! anniversary for those of us who work at Aha!. And AHA is a really interesting story, and it’s an interesting story because of how the business was started, which we’ll get to. But also in terms of what we do. Aha! helps companies build lovable software. And we started the company about 10 years ago. We just celebrated our 10-year anniversary or Aha! anniversary. And the idea from the beginning was, how do we help businesses take a more strategic approach to building software that their customers would really love? And we did that by pioneering a new category of software called Road Mapping Software that allows people to capture feedback from their users, build out their strategic goals and initiatives, define the work, prioritize it, and then create visuals of those plans for different people to understand what’s coming next.
Gene: So can you give me a specific example of what that means? Just think of a customer or a client of yours and how they use your software to do just what you said.
Brian: Yep. Well, let’s imagine the recording software that we’re using right now. Somebody in the company who probably has the title of a product manager had to decide what features were going to go in to the next release of that software. And so people talk a lot about the fact that some people will say that software is eating the world. I like to say that the world is eating software because it’s more fundamental in every aspect of our lives today. The question is what is being built useful or is it more like junk food? And I think a lot of software that’s being built today is not great for people. And worse, there’s a lot of software that gets built that sits on shelves that nobody ever gets to take advantage of.
Gene: So again, using the example of the company that’s building even this platform that we’re on, we use a StreamYard and they’re great. Are you saying that there would be a product manager that’s in charge of, say, this product that we’re using, and if they were using Aha!, would Aha! be used to as a project manager? Would it be used to survey customers? Is it built into a customer’s software? What role does it play?
Brian: Yeah, sure. So it’s a SaaS based application, meaning it runs on the web and product manager would log into it and they would set their goals for their upcoming release, let’s say they release every few weeks. And so they would set the goals for the upcoming release. They would define the features that they’re going to ask the software developers to build, and they’re going to put those in priority order. They’re then going to take a look at the feedback that they’ve received from customers to make sure that their vision is aligned with what customers actually want. And then they’re going to create views of that, or what are called roadmaps to showcase what is coming next with various people in the organization.
Gene: And that way, the people in the organization themselves can all collaborate on whatever new features and development work is being done. Correct? And share feedback until it becomes a finalized product. Is that true?
Brian: Sure. Yeah. That would happen earlier in the process. And you can also use Aha! software to do whiteboarding. So if you’re trying to mock up some early ideas for new screens or new functionality that you want, you can do that in a collaborative whiteboarding setting. And the beauty of doing that in what we call our Aha! notebooks capabilities, is you can go straight from that collaborative, more creative freeform type of discovery directly into structured plans that then become available to the software developers to actually develop.
Gene: Got it. And there are more than 700,000 software products that have used Aha! to help in its development and progress, is that right?
Brian: Right. So there’s over 700,000 users who take advantage of the software every day, and that’s in over 5,000 businesses.
Gene: Got it. Are most of your customers software development companies, or are they companies that are just developing software internally for their own use or both?
Brian: Both. I mean, take a look around the office that you’re in or think about the phone that you carry around with you. Every business now is a software business. When you probably interact with your healthcare providers, you’re doing that online and you’re looking for a tool or something that you want to purchase for home improvement, you’re dealing with a home improvement store that has a huge online center that you can buy from. It has whole e-commerce functionality behind it, fulfillment functionality. So every business that we interact with today is now a software business one way or another.
Gene: Got it. All right. That is very interesting. Now one of the things that you’ve been very, very passionate about is bootstrapping. You built Aha! on cash, not financed cash, no bankers or venture capitalists or anything like that. You bootstrapped this business.
Brian: Correct.
Gene: And just to give our audience just an idea, you guys posted a blog post saying that your company has surpassed $100 million in revenue, which is awesome. You don’t hear that very often, that people bootstrap to get to that level. So let’s start with your story, Brian. How did you bootstrap Aha! To get it to this level without seeking any outside funding?
Brian: Yeah. Well, I think there are multiple lenses to look at that. I think first, when I think about myself, what am I passionate about? So my career has been focused on building software and companies that solve problems that were unseen before, and then building category defining solutions around those problems, and doing it with an exceptional team of people who are working at their very, very best. And so I’ve always been focused on the adventure of that and the achievement around that. I think I’m just wired that way. The company itself, to understand our path, you have to go back a little bit in time. And so Chris, Dr. Chris Waters, Chris, who’s my co-founder, this is our third company that we built together. Previous two were acquired by public companies, and those businesses were built in traditional ways. When we started Aha!, we knew that we wanted to build a different kind of business.
Brian: We wanted to build one that put people first, and we wanted to build one that challenged the narrative, especially where we live. I’m in the heart of Silicon Valley, you have to remember, challenged the narrative that you had to focus on telling a story and valuation before you were to focus on creating value for actual people. And so we knew that we wanted to build a business that was better for people including us and not necessarily oriented for stories and bankers. And that set us off on the path to bootstrap Aha!.
Brian: Now, it’s also important to remember that we’re fortunate. We’re in a business that’s different than many types of small businesses in that it’s low cost, it’s high margin. Chris and I had a lot of experience. We were successful. We had good fortune of being able to bootstrap something for a period of time, and we had developed a really complimentary set of skills that allowed us to run the business for quite some time without any additional outside resources. We had 125 customers before we hired an additional person into the business, for example.
Gene: And you bootstrapped all three of the businesses together, or did you just bootstrap Aha!.
Brian: Aha! was the culmination of our learnings from the first two that were more traditionally funded, and were fortunate to have been acquired by public companies.
Gene: See, and that’s great. And so for people that want to bootstrap a business that number one, have never run a business before, it’s the first time into this, or number two, didn’t sell their previous two businesses to public companies that have some money in the bank. You do agree that you do need those things to be able to bootstrap a business, some experience in some of your own personal people.
Brian: Yeah, I know. Oftentimes when I talk about this, people come to the conclusion that Aha! is really costly to start, and it’s not. It wasn’t. The reason why is, as I stated earlier, because it’s a software business.
Brian: And so it just doesn’t require a lot of capital. And so I think the other facts in terms of our experience, we had worked, and this applies no matter what you’re doing or trying to start, we had worked in the problem areas that we were solving. And so we were software builders within both small and large companies. And so we really had a visceral sense of what the challenges were and a point of view, which I think is important for all businesses. We had a really strong point of view about how those challenges could be addressed.
Gene: I just spoke to a client of mine who acquired a business and did it with no financing, and he said to me, “Listen, there’s no reason to use it outside banks. Why pay bank interest or involve equity partners if I can afford it myself?” It’s the most important thing to do. But then again, there are a lot of companies that have a different point of view and, “Oh, you hear about the real estate firms?” Like, “Oh, we’re going to build our business based on other people’s money.” You know what I mean? And take the value from that. So give me some pros and cons, Brian, of bootstrapping a business versus bringing in outside capital.
Brian: Yeah, yeah, that’s a interesting question. One for people to really think deeply about. So I think it starts with a sense of urgency when it’s yours and there’s no money to lose along the way. And when you do, it’s your money or a small group of teammates money, that drives a real sense of urgency. And it also drives a sense of accountability, which I think is really important and we’ve lost getting back to that in tech the last six months, but we really lost that for a long period of time over probably the last decade or so. So it just drives a different mentality about the business and urgency, and that’s fundamental to getting to customer value. So that’s number one.
Brian: I think the second is it allows you, for better or worse, to ultimately decide what you think is important. And lots of times you get it right, and lots of times you get it wrong, but at the end of the day, you get to decide. So let me give you an example. We were fortunate enough over the last few years to have contributed almost a million dollars to local nonprofits and our team is one of the ways, 10 years ago before it, people thought it was even possible to bootstrap the business, we were a completely distributed team around the world.
Brian: And the realization that we came to was one, we had a lot of good fortune ourselves, and we felt a responsibility to give back to communities that we all live and work in, and to do that through a contribution program through what we call Aha! Cares. And we allow our teammates to champion nonprofits who serve people’s basic needs and the categories of food insecurity, safety, shelter and opportunity in their local communities. And we’ve contributed, like I said, we’re very proud to have contributed almost a million dollars over the last few years. If we were a traditionally ventured back company, that’d be in a high growth environment, that’d all be almost impossible.
Brian: And so that’s a good example where we get to truly live. It’s up to us to truly live our values day in and day out. I think the third is it gives you optionality. It gives you options. No matter what is happening, everything is an option to you. And it’s not what happens in life or business to you, it’s how you respond. And having all options available to you at all times, especially with something that you’ve invested so deeply in, I think is there’s a real value to that. And I think that’s a major pro as well.
Gene: So it gives you motivation when you bootstrap, because it’s your money. It gives you more flexibility in how you spend your money in what you do, like you said, starting up a charitable foundation. And it does provide you more options that you normally, when you be restricted, if there’s other parties involved and how you’re spending what really isn’t effect their money. So those are all powerful reasons why you would want to try and bootstrap as much as you possibly can, as opposed to raising money outside. Give me some of the cons, why wouldn’t I want to bootstrap?
Brian: Well, some businesses can’t. You want to bring a new drug to market? A pharmaceutical, it’s going to be really, really difficult. Do you want to build a warehouse and work on renewable energy or something like that? It’s going to be really, really difficult. You want to build some type of housing that’s going to be really difficult. So I think there are places where the true act of bootstrapping is very, very difficult. I do think though, and I tell people this all the time, that the mindset of bootstrapping crosses all industries and all businesses, and that even people in established organizations can adopt the ideas of bootstrapping, which by the way, we’ve written about, there’s a little micro site called bootstrap.company that shares a lot of the pros and cons as well. And there’s even a pledge there.
Brian: So I think those are a few of the reasons why people might not want to. Maybe if I were to add one more, sometimes people need external expertise in areas that they don’t have. And I think the right investors with the right alignment of values and mindset can bring that additional expertise at times to an organization.
Gene: Give me just a couple of pieces of advice for our listeners, for our viewers, if they buy into it and they’re like, yeah, we are really going to avoid bringing outside capital. We’re going to try and bootstrap our business and grow our business that way. What have you learned about running a company that you’re bootstrapping yourself, that you think other entrepreneurs and other startups could also benefit from.
Brian: Yeah. Well, let me suggest three things. So the first is we have a set of principles that help or really the engine behind our growth. It’s called the responsive method. And the first principle that we wrote down before we hired the first person who joined the company was goal first. Goal first, goal first, goal first. And what that means is you have to know what you’re aiming for. Because even in our world, which moves extremely fast, and software is about agility and incrementalism, you can do all those things. And if you don’t have goals, you can end up somewhere and look around and be like, how in the world did I, why did I get here? And so that’s what happens if you don’t have goals.
Gene: And does that mean when you’re making decisions about spending money and other strategic things, you’re constantly asking yourself does this align with what our goals are?
Brian: Absolutely. Goals become a scorecard for saying yes or no to what you are going to do, and more importantly, what you’re not going to do. And they become a spokesperson for you to explain to people why you might not do something that they think is really important.
Brian: And so they become a framework for success. And I think this gets skipped a lot in business where we’re eager to jump to the solution, but we don’t stop and really put down. And I encourage people, type them out or write them out. What are the goals for the next three months, six months, year? And everything has to start with from there. I think the second is being able to bring people in who want to contribute to those set of goals and that vision that you have into the organization and people who are really aligned create just a tremendous amount of value.
Brian: When people ask, it’s like, people ask me all the time, what are you most proud of at Aha!? I tell them, it’s the people being able to combine a team that’s just incredibly high performance oriented, but yet incredibly kind at the same time, that’s what ultimately makes us go. And so I think the alignment and bringing people in who are really aligned with the vision and the goals and how you think about getting that work done is fundamental. And then third is this becomes what we refer to often as a success disaster. So as you become successful, things that you didn’t imagine to begin with start challenging you. And so as you become more successful, more voices come into the fray as they should, and there are more opportunities to pursue.
Brian: And what happens is you have to decide what you will and what you will not pursue. And so I think especially for founders or early stage team members, constantly remembering what the core of the organization is about and why the business was started and what values matter. It becomes a really important grounding to keep the business moving forward. 10 years in, as you stated, or as I stated earlier, which is a pretty long time for a high growth software company. And so now we’re asking ourselves, what does the next decade look like? And that exercise started with going back to the origin story. Who are we? What do we believe in? What are we trying to get done?
Gene: Yeah. My takeaway from all of that is that you really come at spending money a lot differently when it’s your own money, and you want to make sure that every dollar that’s being spent not only aligns with what, like you said, your goals are of the company, but also long-term what you’re doing with your company. You really are thinking hard about the direction of your company and not just spending money because it’s somebody else’s money without giving it as much thought, and it makes you a much more conscientious manager.
Brian: Yeah. Well, let me push that a little bit further. In our business, of course, most software companies are unprofitable, so what it focuses on, the mine on first is profit because there’s no money to lose. And so profit becomes fundamental. Our business is incredibly unique in the world of high-tech and software for nine years now. We’ve paid profit sharing, so we pay profit sharing, which to me is what people would consider to be an old fashion. It’s an old-fashioned idea, but it’s what we are. We don’t exist as an organization of people working on something together if the business isn’t profitable because it’s not sustainable.
Gene: That makes sense. Brian, I want to thank you for joining us. I think the work you’re doing at Aha! is great, and the bootstrap movement is also great. Aha! is aha.io for any of you…
Brian: Yes.
Gene:… out there. Yes. No?
Brian: Yep. It’s aha.io. We’ve also, which I didn’t point out, we’ve written a bestselling book on our philosophy called Lovability, which is the title is applicable for everyone listening. It’s how to build a business that people love and be happy doing it. It is our story, which is a software story, but a lot of the principles apply to any small business.
Gene: That is great stuff. Brian, thank you so much for joining us. Everybody, I’ve been talking to Brian de Haaff. He is the co-founder and CEO of Aha!. We’ve been talking about his company and bootstrapping as well. Again, Brian, great advice. Thank you for joining us.
Brian: Yeah, thanks so much for having me. I appreciate it.
Gene: Everybody, you have been watching and listening to either or The Hartford Small Biz Ahead Podcast. You can get advice and tips and help for running your business if you join us at smallbizahead.com or sbathehartford.com. My name is Gene Marks. Thank you so much for joining us. We will see you again next time. Thanks so much for joining us on this week’s episode of The Hartford Small Biz Ahead podcast. You like what you hear. Please give us a shout-out on your favorite podcast platform. Your range reviews, and your comments really help us formulate our topics and help us grow this podcast. So thank you so much. It’s been great spending time with you. We’ll see you again soon.
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