Hootsuite CEO Ryan Holmes has been quite busy recently. In addition to prepping Canada’s first AngelList Syndicate, and rolling out a guru employee track across the social media management company, Holmes has penned a guest editorial for the Financial Post.
Highlighting the huge funding disparity between U.S. startups and their Canadian counterparts, Holmes lays out in the article a series of financing tips for founders to follow, littered with examples from Hootsuite’s history. We’ve included Holmes’ four important funding-related tips below, with relevant excerpts.
1. Start lean
“Generally, you don’t need to invest a lot in infrastructure or capital costs to begin exploring a concept. The key is to get something out there, even if it’s not perfect, see what sticks among users and pivot accordingly. This is much easier to do when you’re still in the napkin-sketch phase, before boards, investors and tons of overhead come into the picture.”
2. Raise based on context
“Hootsuite bootstrapped for a year, but the clock was ticking and the company was moving in slow motion. Competing social media management products were hitting the market and Facebook and Twitter were going from dorm-room curiosities to mainstream tools. Meanwhile, it was becoming clear that scaling and monetizing our tool would be capital intensive. In 2009 one year after launching, we secured a $1.9-million Series A round.”
3. Stay capital efficient
“When Hootsuite was able to secure its record $165 million raise in 2013, a portion of that went to what’s known as secondary financing. Essentially, our investors bought company stock back from the founders and early employees who built the business. This was the first time many of us saw any substantial liquidity (read “cash”) from our time at Hootsuite. The impact — psychologically and on a practical level — was huge.”
4. Take equity off the table in later rounds
“What we didn’t do was change our underlying philosophy on spending. We were determined to remain capital efficient. Our new office space was anything but glamorous — filled with used furniture in aging warehouses in an industrial area of Vancouver. We didn’t spend on gala launch parties and our salespeople travelled on the cheap. And, because traditional advertising is so costly, we continually pushed ourselves to find alternative ways to boost our product’s exposure.”
The full Financial Post editorial contains even more insight, as well as a shot of the company’s amazing owl bus from SXSW 2012. You can find it here.