After 5 years of bootstrapping a profitable business with 15,000+ users, we raised $500,000 with Indie.vc. Here’s why.

We’ve been profitable since Month 1 and never raised any money – until a few months ago.

Raising money for the first time in 5 years.

We’ve been a two-person company, serving 15,000+ people in over 25 countries, for the past five years. Originally, we were a spin-off from Basecamp. Since then, we’ve been profitable starting in Month 1 and every year to date. We’ve never raised a single dollar from investors…

Until this past May.

A few months ago, we decided to accept a $500,000 investment from Indie.vc. Here’s why.

First, a question.

Why do people start companies?

For some, starting a company is a means to solving a meaningful problem that helps people. Others start a company because they want to impress people, and become respected and admired.

Another set of folks might tell you that they started a company because they love the process of building something. And perhaps another group of people start a company to answer an existential question for themselves, and validating their purpose in this world.

For myself, over the past 10 years, my own reasons for starting a company have fallen into one (or several) of these buckets at various moments in time. Case in point: The very first company I started when I was 22 was fueled by my desire impress others – but that’s a story for another time.

More recently, I’ve realized, in starting and building Know Your Team, there’s another reason that I started a company: Optionality.

The choice to choose.

I don’t know if it’s the immigrant kid in me (both of my parents came to the United States from South Korea before I was born) – but I’m dumbfounded at the pure luck of my circumstance. I have the immense privilege to choose how I want to make a living. I don’t take it lightly.

So with that choice, I’ve perpetually thought to myself: How can I choose intentionally?

Starting a business, for me, has always been a means of answering that question. Entrepreneurship is the ultimate exercise of choice.

When you run a business, you can choose exactly what problem you want to solve. You can choose how you want to approach the problem. You can choose who you want to work with, who you don’t want to work with (for the most part). You have a choice on so many of the inputs.

Now, this doesn’t mean you’re beholden to no one. The market, your customers, your team, your business partners, your board, all act as inputs to your business too.

But you can design your business in a way to choose which of those inputs carry more weight. You can choose which of those things – and who in particular – you want to bend your ear toward more.

You can choose who to listen to.

Choosing how to build Know Your Team.

This past December, when we decided to relaunch Know Your Company as Know Your Team – a new product, new pricing model, new company name – my business partner Daniel Lopes and I thought long and hard about what we wanted our inputs to the business to be. We knew we had the luxury of choosing who we wanted to listen to – and we wanted to do right by that.

“The only people I want to listen to are our customers, current and prospective: Employees, managers, leaders, CEOs.

[…]

For me, I got into this whole starting-a-business thing because I wanted to do it on my own terms: Small in headcount, big in impact, independent, profitable. Life is short. Why build a business any different from your vision for it?”

I wrote that back in December 2018. That holds true today.

As a result, we chose not to raise any money. We felt that having investors would distract us from listening to those people we wanted to listen to most: Our current and prospective customers. We wanted to continue to focus on adding value and delighting managers, executives, CEOs, and employees. We don’t want to sell the company. And we’re not interested in chasing an exit. We want to do what’s best for our customers and make sure their interests are protected.

The minute you accept money from someone or an institution – be it an angel investor, a venture capital firm, or a bank – their interests inevitably bleed into your interests. Your interests aren’t your interests anymore. And they definitely aren’t your customers’ interests, either.

Holding our breath.

We spent six months rebuilding the entire product, marketing site, onboarding process, and billing system between just the two of us. When we shipped the brand new Know Your Team in December 2018, we had $140,000 in the bank – and we held our breath.

Then, we exhaled. We saw 555 sign-ups in the first month alone. Since then, almost 2,000 managers have tried our product, and hundreds of managers have purchased Know Your Team in the past six months.

Today, 926 managers and 11,623 employees at 581 companies (and counting!) all over the world use our Know Your Team every single day.

The need for KYT 2.0.

What we built was working – but we needed help. Especially, as we looked at what we wanted to build next: KYT 2.0. Our vision for Know Your Team is for it to be the resource that every new manager in the world can learn from and benefit from… and we knew what we needed to do to make that vision a reality. It was going to take time and some extra hands.

Not to mention, at the end of last year, Daniel and I had to be honest with ourselves: We were tired. As a two-person team building and growing a product used by 15,000+ people, it was the two of us coding and designing every product feature, onboarding customers, fixing bugs, handling customer support, writing every single blog post, producing our podcast… and more. It was a bit of madness. We worried that our pace of work wasn’t sustainable and that we might burn out.

So for the first time in five years, we considered raising money. But from who? How much? Would it make sense for us?

Would we be able to find the right partner – the kind of person we would actually want to listen to?

Why Indie.vc.

I first met Bryce Roberts back in 2015. He’d just started this brand new fund called Indie.vc. It was different. The model was that they invested $250K – $1MM in profit-focused companies, in exchange for equity in the company – but you as the founder have the option to buy that equity back, as you become more profitable. Or you could choose to raise a traditional venture round down the road. (Here’s a bit more about their terms they offer.)

In a word, what Indie.vc was focused on was “optionality.”

Initially, Bryce invited me to the one of the very first Indie.vc info sessions in 2015 held in Chicago, and I was intrigued. (As a side bar, I was also impressed by Bryce as a human being: I gave him some feedback after the info session and he was remarkably receptive.) But I wasn’t interested at the time in Indie.vc. I’d been running what was then called Know Your Company for just over a year. Everything in the business felt very new and green to me. If I’d accepted any sort of investment at the time, I didn’t know what I’d do with the money.

I didn’t have the clarity of vision that we do now. So while I appreciated Bryce’s audacity of a new model – one that says founders should have more choice for how they build their businesses – I was still unsure of what kind of choices I wanted our own business to make.

Fast forward to this year, and that’s changed.

I knew exactly what we needed the money for. We needed to pretty much scale my time and Daniel’s time. We needed time to build Know Your Team 2.0. We needed help to create a world where bad managers are the exception, and the learning curve to become a good manager isn’t so high. And we wanted to do it in a way where our customers’ interests came first – not our investors, not our board’s, and not even our team’s.

I knew that raising money from a traditional venture capital fund didn’t align with us. If optionality is an important part of why I’m doing this whole start-a-business thing, traditional venture capital seemed to detract from that optionality, instead of increasing it. By nature of venture capital’s business model, a $100MM business is considered a failure. Taking 10 years to generate multi-million dollar profits is a failure.

However, to me, both of those outcomes are excellent outcomes. So long as we’re helping people in a meaningful, sustainable way, that’s success to me. Small in headcount, big in impact, independent, profitable. That’s my vision for Know Your Team. Venture capital didn’t seem to help make that picture clearer.

But Indie.vc? The promise seemed right. So we applied.

We didn’t talk to any other investors. We felt at the time, Indie.vc, was the only model that made sense – and was being run by someone we trusted. If we weren’t accepted by Indie.vc, Daniel and I decided we’d do it on our own, and continue to bootstrap the company.

What we’re doing with the money.

The good news (if you couldn’t tell from the title and introduction to this post!) is that they accepted us. We asked for $500,000, and that’s what they gave us. It’s what we knew we needed to make two hires: An operations manager to help scale my time, and a senior engineer to help scale Daniel’s time.

I’m honored to welcome Mandy Moore and Marcus Derencius to the team. They were each our #1 choice for their respective roles and are excellent at what they do. They’ve already hit the ground running and have made Daniel and my life easier. We in fact just had our first company retreat last week 🙂

Our experience with Indie.vc so far.

We’re one of seven other companies in the cohort, chosen from 500+ companies who applied to Indie.vc. We recently got to meet the other founders this past June at the Indie.vc meet-up in Utah… and I was blown away by the caliber of folks there. Robust, profitable businesses. Sharp, thoughtful founders.

And, I got something I never thought I needed: A community of people who also value optionality. When asked the question, “Why start a company?” many Indie.vc founders’ answer was eerily similar to my own.

Thank you, Bryce and Indie.vc, for creating a Schelling point for folks who might answer “Why start a company?” a little differently than most.

After all, if given the gift of choice, we should feel encouraged to choose our own answer to that question.

Here’s to the existence of Know Your Team to prove it.

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Written by Claire Lew

CEO of Know Your Team. My mission in life is to help people become happier at work. Say hi to me on Twitter at @clairejlew.

Comments

  1. Congrats Claire! I love what you guys are doing. It’s great that new funding models like this are available. Just a few years ago I wouldn’t have considered VC but now there are some great alternatives for entrepreneurs that want to take a different path than the traditional VC route.

    Can’t wait to see what’s next!

  2. Hi Claire. You’ve written,Bryce’s audacity of a new model – one that says founders should have more choice for how they build their businesses.
    Will you elaborate it or will share your discussion about it with Bryce. I’d liver to hear from you.

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