From Freelancer To Founder: Episode 2
If you have not read the first part yet, I strongly suggest you do so. It will only take 5 minutes of your time and will set you in the right context to follow the story.
As the sun started to fade away on Quebec City’s not last and certainly not least cold winter day, I stood up in a room in front of a small group of angel investors.
As I started to explain the core of my company, the inception of the product and the next milestones, a couple of heads were nodding in approbation. A little more than halfway through my pitch, I was interrupted by one of the potential investors (whose head wasn’t nodding):
“Young man, what’s a SaaS?”
I do all I can to come prepared, but this one really caught me off-guard. I must have forgotten to say something. Was it that third tooth in the back that made me mispronounce the word “SaaS”? I was pretty sure I properly articulated “Software as a Service”, but the whole sentence must have been clouded by the noise of those taxis outside rushing to pick up the last non-Uber client. As investors, they were supposed to be the ones in position of knowledge and authority.
Back in my freelancing days, I was afflicted by what I will call the “falsetrepreneur” syndrome. You don’t feel like an entrepreneur because you are the only human in your company. You don’t feel like an entrepreneur because you only sell your craft and skills. You don’t feel like an entrepreneur because you only report to yourself. You don’t feel like an entrepreneur because you only manage your finances.
Only?
How wrong was I. Being a freelancer taught me much more about entrepreneurship that I could ever be grateful for. As a freelancer, I learned about business development trying to market my craft. It taught me to have the confidence that I can do anything by myself, how to manage finances, do forecasts and planning, how to do a proper budget, how to segment my time on various activities. Also, I learned the hard way how easily a cash flow can be annihilated by late and non-paying clients.
I wasn’t only a freelancer, I was a complete corporation contained within a one-man army.
When I launched Momenteo last year, I still didn’t feel like I deserved the entrepreneur title, I was just a freelancer with a side project. An entrepreneur is someone who successfully launches and manages a business of multiple employees, right?
I used to believe that you either launched a wildly successful business in your 20’s or you skipped your turn and sold your soul to a corporation. I naively felt like success was something that happened randomly to the luckiest entrepreneurs. Facebook, Twitter, LinkedIn, AirBnb and those other so-called unicorns; I thought they all bloomed overnight. It all seemed so simple: have a cool California house, invite your friends and jump in your pool from the roof, then have a billion dollars valuation.
Media glamorization of success stories makes it look so easy. Facing the challenges and obstacles of the real startup life, the one they rarely talk about, I realized how ignorant I was. It was one big lesson:
Overnight success exists — the sun just has to go MIA for a few years.
Last summer, I finally accepted the title “entrepreneur”. People came to me for advice on how to start a business, I started mentoring in multiple startup events, became “one of the boys” at our local tech drinks and met famous entrepreneurs from my city who knew who I was.
This impostor syndrome actually ended up having a positive impact in my life. In the end, what mattered the most was proving to myself that I was able to achieve great results — not showing off to the rest of the world. Ironically, they all knew I had what it takes to be an entrepreneur; I was the only one unaware of the situation.
“A SaaS is a centrally hosted software based on a subscription model”
I started to explain. “Okay, I get it. Then your valuation is wrong. I ran a massage therapist network for a couple of years and a recurring business is worth no more than 20 times its monthly revenues.” he replied.
I admire how this man went from “I don’t know what a SaaS is” to “your valuation is wrong”. He was acting as the obnoxious leader of the investors.
He continued with a series of advice on how to run a recurring revenue business. “What you want, son, is to create a model where your customers are locked into the system and can’t get out. That way, your churn will be reduced to deaths and other tragedies you can’t control”.
I was almost sure — or maybe hoped — he was joking. Locking clients into the system seemed the best way to create a negative vibe around your business and explode your support costs. Being confident he was sarcastic, I replied with a joke of mine which I learned from being a customer of Rogers for a couple of years: “Absolutely! After locking them in, it’s only a matter of raising the monthly subscription fee and your business will grow exponentially”. He seemed pretty satisfied with my answer, he was not joking.
“You’re not the kind of investor I am looking for” is all I could think of. I packed my things and started to think about how wrong it is to seek money to build a business if it’s not smart money. I don’t want investors who might hurt my customers. I want investment from people who deeply understand the problem I’m trying to fix, those who can help me deliver the best there is to my clients. In the end. I am aware that what investors want is to multiply their money, but I won’t sacrifice my customers happiness for short term cashflow improvement.
Finding money is quite easy; finding smart money is not. I will either find the investors that will empower me into improving the experience of my customers, or I will keep bootstrapping. I believe value can be created for multiple parties when we are all transparent about our expectations and requirements.
Their expectations failed to meet my requirements.
Stay tuned, I’ll make sure to let you know what happens next.
This post was originally published on Momenteo’s blog: https://www.momenteo.com/from-freelancer-to-founder-episode-2
