Lessons from Sixteen Months of Bootstrapping at Underdog.io
In April 2014, Josh and I started Underdog.io as a side project to help pay the bills and buy some time to finish another product that we had been building. The premise behind Underdog.io was simple. If the hiring/recruiting spectrum is bookended by job boards on one side and agency recruiters on the other, we saw an opportunity to build something in between the two that struck a balance between the effectiveness of a good recruiter and the simplicity and inexpensiveness of a job board.
Sixteen months later, we’re a team of five that’s closing in on $1 million in annual recurring revenue. Aside from a $20,000 loan from a friend, we haven’t raised any money. We thought it would be helpful to share how we’ve made it work so far and some of the things that we’ve struggled with.
Balancing revenue and user experience
For us, there has always been a healthy tension between maximizing revenue and really nailing user experience. We realized pretty early on that, in order to attract the highest-quality candidates, we could only work with the highest-quality technology companies. To maintain that standard, we’ve turned down more than 50% of the businesses that have tried to sign up for Underdog.io. Sometimes this literally means refunding money to willing buyers, which hurts. Keeping the bar high allows us to work with some of the most talented engineers, designers, product managers, and businesspeople in the industry, which is what we want. We’re leaving money on the table in the short term, but ensuring a better candidate experience for the long haul.
Aside from a two-month-long experiment, we’ve also resisted the urge to charge placement fees, the typical unit of payment in the hiring industry. Instead we charge companies a low monthly subscription fee. Our commitment to lowering the cost of making a hire and removing unnecessary intermediaries, both of which are part of our company DNA, are more important to us than chasing short-term dollars.
Staying small and moving slowly
We’ve been perpetually understaffed since day one. My co-founder Josh likes to say that the five of us are doing the work of a team twice our size. He’s not far off. To fill holes, we liberally hire freelancers with domain expertise that we don’t have in-house. We’ve worked with incredible engineers, marketers, designers, and community managers during the last year. Using freelancers smartly is a great way to keep costs down; it’s also a nice way to test out fit with candidates. Our first engineering hire joined full time after doing a three-month contract with us.
Part of staying small means coming to terms with a comparatively slower product development cycle than companies with deeper pockets. Internally, we’ve built a powerful tool that automates much of the work that goes into our weekly candidate batching and delivery process, but for our users, we’re still an email-based product. I never thought that, 16 months in, we’d be using a site that’s nearly identical to the one that Josh and I threw together during a two-day build in April 2014, but we’ve prioritized other projects instead.
One of the unintended consequences of this approach is that we produce a much simpler product for companies to digest. Many of our customers continue to tell us that they love the simplicity. What we did out of necessity has become a strength of the business.
Aligning founder expectations early on
Whether you’re planning to raise money or bootstrap, everyone on the founding team needs to be aligned about where the company is heading and how it’s being funded. This is especially true in a company’s early days, a lesson that we learned the hard way.
Since Underdog.io started out as a side project, we didn’t really have massive ambitions beyond working together on something cool and building a product that customers would pay for. We wavered on the question of raising money. We hadn’t necessarily planned to build a bootstrapped business, but we wanted to have full control over our product and move at our own pace. A few months after launch, and in part because of poor communication internally about our fundraising strategy, we parted ways with a third co-founder. He needed more money than our bootstrapped business was making to support his family.
At that point, things looked pretty bleak. We had lost our engineering lead and a lot of our early momentum. Josh and I had some difficult conversations, confirmed that we were still having fun, took the $20K cash infusion to backstop us, and got back to work.
(Side lesson: it’s helpful for founders to be as transparent as possible with each other about their personal finances. Josh knows how much money I spend every month, and vice versa. We’ve paid each other matching salaries since we first started taking one, which wasn’t all that long ago.)
The reality, of course, is that bootstrapping is neither harder nor easier than raising money. Both paths are extremely, extremely hard.
Would we be more compelled to focus more on revenue — possibly at the expense of UX — had we raised money? Maybe. Would we have built more public-facing product? Probably. But, would we raise money if we had to do it all over again? Definitely not. We’re not allergic to taking money, but if we do go out and raise, we want to make sure that it’s the responsible thing to do for the business. In the meantime, we’ve enjoyed staying self-funded and singularly focused on helping people find great jobs with great companies.
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Published in #SWLH (Startups, Wanderlust, and Life Hacking)