When starting a company, conventional wisdom says that you need to decide certain things early and focus. However, when we founded Looker, my business partners and I put off making some key decisions until the future was clearer. This approach allowed us to focus on our product vision and customer growth.
In the early stages of founding our company, there were three nagging questions:
- Should we accept venture capital?
- Was our company going to deliver a product or a service?
- Would our software be on premise or hosted?
We clearly knew what we wanted to do: deliver flexible access to data into the hands of as many folks inside of our customers' organizations as possible, so they could make better decisions.
What we didn't know was the best way to structure a business to do that. Should we sell software? Should we sell consulting? Would customers be comfortable having their crown jewels (data) in the cloud? How much consulting would it take to deliver our value?
We didn't know. We also didn't worry about not deciding. In founding this company, I learned there are three decisions that startups can benefit from postponing.
1. Whether or not to seek venture capital.
Some great businesses aren't venture businesses. It’s important to give your business time to develop before you decide venture funding is the right approach.
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If you take venture funding, you are jumping on the racetrack. You are looking to build a fast-growing business that's going to be enormous. If you have great product/market fit, going with venture capital is a fantastic route. If your product/market fit isn't strong and you've taken venture capital, you may be locked into a strategy that's suboptimal for what you're building.
We waited to see if we were a venture business. We could provide value almost immediately, so we also generated revenue very early. That early revenue created a discipline in the business to pay close attention to the economics.
Looker was cash flow positive when we decided to take seed investment. The size of the round wasn't important – the partners were. We chose investors we knew very well and who would give us the most flexibility in our business model, timing, and approach.
Throughout the next year, we saw tremendous product/market fit and a repeatable sales and delivery model. It was only then that we decided it was time to explore venture funding. We found an investor who deeply understood our product and philosophy. Electing to accept or pursue venture funding should be timed to give your startup the best combination of growth potential and flexibility.
2. What your end product will ultimately look like.
When we started, we weren't sure if we were going to be a service (where we do all the customization) or a product (where we sell the tool and the customer does all the customization). Again, conventional wisdom says “decide this early.” In my experience, if you maintain a consistent company vision, exploring your offering as both a product and service will allow your business to steer itself in the ideal direction.
At Looker, we decided to take customers in both service and product models, providing different degrees of customization. To avoid being locked in as a service company, we decided that, as a rule, all customization must happen inside the product.
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In the end, after learning how the product was being used, we didn’t make the decision we thought we had to make. We sell Looker as a product, but we take a forward-deploy approach (our free trial), building out enough design patterns to ensure the construction of the application is very successful. So we are a service too.
3. Your technology needs.
Often, startups feel pressure to make technology decisions that lock them into a deployment strategy, before knowing critical aspects of their customers’ IT trend adoptions. It is best to wait to make a decision, to maintain flexibility. You may also learn, like we did, that the decision is inconsequential.
When we started building our business, we didn’t have a clear picture of how our product would be deployed. Would we be a cloud service or install in our customers' infrastructure? We thought that, at some point, the majority of our customers would go one way or the other, but at the early stage we couldn't know which.
We had to select the right programming tool for a scenario we couldn’t know. So we chose a flexible tool, JRuby, which didn’t force us to choose one side of the on-premise or hosted debate. It also turned out we were wrong about believing we had to make a decision: 50% of our business is on premise today, and the other 50% is hosted.
By saying "I don't know right now," we chose flexibility over and over. Each time, we were surprised. Product or service turned out to be a false choice, as did on premise or hosted. Deferring when to take money until we knew we were a venture business made it much easier to raise the money and to do so with the right people.
Not deciding too soon can be a very good decision—one that lets your business grow stronger than it ever would have otherwise.