Shoutouts & Callouts: best utilized alternative financing methods

Speaker A: Welcome m to the SaaS Builder podcast. I'm Randy Wootton and joining me is Brian Parks, who's the CEO and co founder at Bigfoot Capital, which provides non dilutive growth capital for established B2B software companies as an alternative to VC or PE equity and debt. Okay, Brian, I want to move to our lightning round where we have some fun getting your quick reactions to questions from SaaS founders. Are you ready to.

Speaker B: Let's do it.

Speaker A: Okay, last question for you. Shoutouts and call outs. Which SaaS company do you believe has best utilized alternative financing methods to achieve rapid growth while maintaining long term stability?

Speaker B: I wouldn't claim to be intimately familiar, uh, with like mailchimp's capital structure, you know, amazingly successful company. Right. I think we all understand that. And they didn't raise, I'm trying to think if they raised any, any institutional venture round before they sold to Intuit. I can't remember if they like took a growth round from someone like an Excel who can't, you know, I don't believe they did. And so, and I don't know if they ever borrowed any money. I really truly think they just truly bootstrapped it. They had a, they had an agency, a marketing agency. They ended up building a product, eat their own dog food and uh, not slow, that's not the right word. But call it 15 to 20 years to something very large. So I'm like, hey. And that harkens back to, back to my investment banking days. Now they had a much bigger outcome than any of the clients I worked with. But like, it wasn't overnight. They took their time. I'm sure they worked really hard and had their own pressure and objectives to grow the thing, but they were able to do it in their own way and ultimately have um, a ton of success.

Speaker A: Well, I think we've seen broadly in the market this shift. People talk about growth at all costs to efficient growth. And one of the things I tell people is like you always want to be in my opinion. Look, I haven't had, I don't have a helicopter, I don't have a yacht. So you know, take this with a grain of salt. But I do think this idea of having control over the business so that you can get profitable at any time, because when you're profitable, you're controlling your own fate, you're making your debt payments and you're not obligated to do anything that isn't smart for the business. And so then you can invest more and go unprofitable for some period of time.

Speaker B: Right?

Speaker A: You're doing it deliberately, intentionally, and you know how to pull back. ServiceNow did this really well. I remember it was either their CEO or CFO who said, I can get profitable at any point in the street was like, blah, blah, blah. And he did it, he just did it. And then all of a sudden their multiple went up, you know, like 30x or something. It was just the craziest thing in the world. But it was because he and the team, the broader team, had their hands around the business and they could say we can go profitable when we need to, but now we're going to invest to continue to grow. And it's awesome.

Speaker B: Yeah, that's great. That's great flexibility to be able to have. And I think for me it's all about, look, at the end of the day, uh, this may not play well, but I think of the businesses that we work with as small businesses in the grand scheme of things, they are subscale, sub $15 million in revenue. That's not a very big company. Now they may have certain dynamics that make them more compelling than any other small business out there in the world. Margin profile retention metrics, you know, the true promise of subscription software, assuming that is being delivered through good retention. But that's been a four letter word. That's literally a four letter word and has been kind of one in startup circles. The word small business is a four letter, uh, small business. Oh, uh, that's not exciting. Which has been put forth by venture capital. They're like, hey look, you can have a very successful small business or if you don't want to apply that moniker to it, it's called something else. That's why we intentionally say we work with established software companies. They are established. It takes a lot of work, learning, failure, sometimes some capital to get to $5 million of revenue. It just does.

Speaker A: And very few, uh, get there.

Speaker B: I mean, very few get there.

Speaker A: Look at the Pareto chart. In terms of how many companies actually get to those different wickets, that's what I show my company was like, look, we're in rare air in terms of where we are right now. And that just means it gets harder and harder. And so at each one of those, there's a fallout for eight. So if you're still being successful, you still have control of the company and you're driving to profitability, uh, you're going to keep being one of the breakouts.

Speaker B: And for me it's basically okay, you can be on that path. Maybe you're growing it 30, 50, 70%. Don't know you can hop onto a more aggressive growth path with. You can do that and then you can hop back off of it. Maybe if you're just from day one on this super aggressive thing that's supposed to pan out, it can be really hard to hop off of that path. Yeah, you're probably not going to do that. You're probably just going to, you know, either really succeed or fail and way, way, way more fail than really succeed with that.

Speaker A: I think, you know, wrapping this up a little bit is just this idea of, uh, learning about capital structure. Being deliberate about capital structure is incredibly strategic and something CEOs should spend time on. Okay, that wraps up this episode of the SaaS Builder podcast. Thanks to Brian Parks, co founder and CEO of Bigfoot Capital for being my guest. That's it for today and until next time. Remember, there's always a path to unlock your next stage of growth.