6/03/2021

How to Leverage Your Resources as a Startup

Every startup founder—whether you’re funded, bootstrapped, or somewhere in between—knows what it means to be scrappy. After all, scrappiness is its own type of innovation: creatively thinking about your resources. And, yes, even the scrappiest of companies have resources.

The question is: How do you leverage your startup resources—money and otherwise—strategically?

At Elsewhere, we often evaluate what founders have done with their resources while bootstrapped as an indication of how they will build once they take on more capital. After years of experience working for and investing in startups, I’ve seen that the quality of a founder’s judgment ultimately matters more than the quantity of their resources.

You can over-capitalize a business, which is why it’s important to think about leveraging what’s available to you before rushing to raise. Instead of operating with a billion or bust mentality—in which founders and firms deal in large sums of capital (and equally large risk)—Elsewhere supports raising just the right amount of money and pairing it with the right expertise.

In this post, I’ll share three guidelines for prioritizing your team’s time, talent, connections, and cash in the early stages of your company—so that you have a strong understanding of how much you really need to achieve your goals in the future.

Build a strong product first

It’s much easier to move faster than it is to slow down.

That’s why the popular growth-first mentality of Silicon Valley often leads to startups becoming part of that 90% failure statistic. When you grow too quickly and burn too much cash, investors typically get their money back—but founders don’t. I witnessed the consequences of growing too quickly first-hand from working at a startup that didn’t have a unicorn exit. We hired a ton of salespeople aiming for 20% growth month over month, but we didn’t have the foundational product-market fit to fuel our success.

Instead of lasering in on sales growth in the beginning, focus on building a fantastic product and ensuring product-market fit. As a pragmatic product-led growth strategy indicates, a product that solves your customers’ problems will soon start to sell itself. Once you begin to retain customers and grow profitably, you can map out which resources—such as salespeople—can help you scale this growth.

Define and find the right people

Your founding team is your greatest resource. At the same time, hiring more people is not always the right answer to your challenges.

You need to identify the right people, both in terms of expertise and seniority level.

Oftentimes, new founders try to throw people at a problem. If you’re having trouble closing deals, you might think, “Oh I need a new VP of sales” or “We just need more salespeople.” But - like growing too quickly - hiring too quickly won’t solve the core issue: your product.

When you’re hiring, prioritize a nimble team. Think about the current skill sets at your startup: What do you, as the founder, bring to the table? What skillsets does your co-founder, or other early employees have? Then, think about the skill sets you need right now: Are you defining go-to market fit? Building out a services business? Launching a content marketing program?

The best hiring strategy is finding scrappy people whose experience complements your expertise: mid-level management talent—or serial startup folks—who are willing to dive into the day-to-day work and experiment. While hiring a very experienced SaaS executive probably sounds impressive, that’s not necessarily the talent you need at your early stages.

These people don’t need to be full-time hires, either. You can add these skill sets through agencies or contractors, as these temporary arrangements can flex as you learn more about what drives your business growth. You should also work with your investors (if you have raised outside funding) to tap their network for operational expertise and board members.

Track metrics early

Metrics matter, and there are ways to begin collecting data as an early-stage or bootstrapped startup that don’t require complicated software.

Offering professional services, for example, is a valuable way to both fund your software development (accessing more resources) while gathering critical market insights and product feedback. If you don’t have a services business, simply showing your product to your connections and existing customers—and categorizing the feedback you receive in a cohesive way—is a cost-effective way to begin analyzing your product-market fit. You can also offer a freemium or free trial version of your product to understand if and how your product is resonating with potential customers.

There are also defined SaaS metrics that you can track early on in order to better understand where and how to leverage your resources later. For example:

• Churn rate reveals whether your customers are continuing to use your product. If you have a large amount of customers churning (not renewing their contract), you likely have a product-market issue, which needs to be solved before focusing on further growth.
• Net retention will help you understand if customers are increasing their spend with you, so you can figure out what type of customers are continuing to invest in your product and how you should prioritize your roadmap to meet their needs.
• Sales efficiency. Even if you have a very lean team right now, you should be keeping track of how much you spend on sales and marketing compared to the amount of new and upsell bookings that you close in that same period. In the early days, you likely won’t be getting your investment in sales and marketing back. But over time, you want to see your sales efficiency increase (more than $1 of new and upsell bookings for every $1 you spend on sales and marketing) before you start investing more money in those arms of your business.

It all leads back to your product

When thinking about how to leverage resources as a startup, the answer almost always points back to focusing on your product first and foremost.

When you begin to truly focus your resources on building the best product possible, it becomes clear why more people, time, and money will never make up for poor product-market fit. On the flip side, a precise product-market fit will almost always guide you to success—even with a small and scrappy team, limited time, and lean capital.