Why This Entrepreneur Chose Bootstrapping Over VC Funding After Working in Tech

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Funding announcements get a significant amount of fanfare, but profitability and being cash-flow positive does not. Like it or not, venture capital is borrowed money and it must be repaid - with interest. Raising venture funding is glorified with big events but are there alternatives to VC funding?

After working as a marketing executive in startups, green technology and cloud hosting, Naly Rice started LN Creative Group (LNCG), a technology marketing company, after growing frustrated with the lack of technical expertise in marketing agencies and seeing new trends within the marketing industry. Naly chose to bootstrap her business instead of seek VC funding which helped her business become cash-flow positive within a couple years and avoid the often ignored side effects of VC investment.

You went from working in tech to owning your own tech marketing agency. How did you make the leap from tech employee to agency owner?

I worked as head of marketing for a couple technology companies and became increasingly frustrated with marketing agencies that didn’t truly understand technology, software, and brand experience. As a marketing executive, there always seemed to be a lack of partnership with marketing agencies. They saw the company as simply a one project client or a singular campaign when we really needed a true partner. The role of the CMO and the marketing department was also rapidly changing, and I saw my opportunity to get into the market.

I wanted to build a marketing agency with an “as-a-service” business model and technology at the core of everything we did. Working in technology made me realize how much better “off-site IT” was. It not only saved money, it actually helped some companies accelerate their growth. I wanted to recreate that model using marketing. I started doing research and when I read that Forbes declared “Marketing-as-a-Service” as the future of marketing, I knew I was on to something.

I started the company in 2013 and didn’t quit my full-time job until 2015 to ensure that I didn’t put myself in a risky situation. Even after I quit my job, I continued to work part-time and freelance to help pay the bills while I was getting the business off the ground.

What is bootstrapping and why did you choose that over VC funding?

Bootstrapping is when you start a business using your own capital with minimal or no outside investment. It allows you to maintain control of your business with discipline when it comes to spending.

When I worked in technology, I saw a lot of companies receive VC funding only for the businesses to quietly crumble a couple years later. I also saw small humble startups find alternative routes for funding and grow their businesses one customer at a time.

I chose bootstrapping because I wanted full ownership of the company, how quickly it would grow, and have time to iterate our business model without pressure from VCs to turn a quick profit. My service-based business also wasn’t a good fit for VC funding.

I saved every penny, reinvested income from the business, and was as lean and cautious as possible when it came to spending. I decided not to take any investments from family and friends, instead using my own savings and 401K. In the end, bootstrapping was the best decision I ever made for my business.

The great majority of successful businesses start out small and carefully scale over time to become profitable companies, whereas venture funding is about high-risks, high-returns, and aiming for an IPO.

What should women entrepreneurs know about venture funding?

Some entrepreneurs think they "made it" if they finally get funding. Little do they know, it's the start of a new partnership - with interest. It’s not free money and if you’re not successful the VCs can come and liquidate your company to recoup the funds. Venture funding isn’t a guarantee of success, and its side effects can sometimes sabotage your business.

Selecting the right venture partner, understanding the VC funding lifecycle/funnel, figuring out your exit strategy, and asking only for what you need are all critical things to consider if you’re seeking VC funding.

Also, a very small percentage of startups actually get funded - less than 1%. It doesn’t mean you should give up on your business idea. The great majority of successful businesses start out small and carefully scale over time to become profitable companies, whereas venture funding is about high-risks, high-returns, and aiming for an IPO.

VC funding can’t replace a great product or
service that people willingly buy on their own.

What advice would you give to aspiring entrepreneurs?

Be scrappy, test your product, and get one (preferably more) paying customers before you quit your job or seek funding. Whether you get VC funding or not, it still can't replace a great product or service that people willingly buy on their own. If you find that you can’t make one genuine sale, it’s time to rethink your approach, reframe the target market, and/or evaluate the business as a whole.

Additionally, have patience and schedule in “me time.” Burning out is real and harms you and your business. Self-care is exceptionally important when you’re starting a business so work hard, but also don’t forget to do you.

LN Creative Group is a technology marketing agency. Can you explain exactly what makes your agency different from other marketing or advertising agencies?

We believe that the future of marketing is in Marketing-as-a-Service (MaaS). The marketing department, and the role of CMO, has changed so much. Go to any company and the head of marketing’s job will be wildly different. Unlike traditional marketing agencies, we’re more like an off-site marketing department that knows the company and is indistinguishably aligned with our clients’ goals without the cost, time, and training needed to hire a full-time staff.

What are you most excited about in 2019?

Launching my podcast #MarTechTalk, speaking at more women entrepreneur events, and moving into a new home with my husband, Chris, and our dog, Taco.

Naly Rice is the CEO of LNCG, a tech branding, marketing & design agency.

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