@GeeknRolla – Bootstrapping, Scaling and Cashflow by William Reeve

William Reeve, serial entrepreneur and Angel investor, spoke at Geek ‘n Rolla on “Bootstrapping, Scaling and Cashflow”. Since then I’ve had many people tell me how great his speech was. So he has kindly supplied his slides from the speech. (We are working on getting all audio from the day as well).

Due to a technical fault at the time TechCrunch Europe wasn’t able to live blog his speech, but we now have the video:

Here’s a selection from just a couple of blog posts about his talk:

Redcatco

* More cash doesn’t mean more customers. It is how you use it.
* Boot strap with cash – cashflow beats money.
* Think about your burn rate. How much cash you are consuming each month controls your future.
* Look for performance based spend.
* Pick the metrics that matter, and manage tightly against them – if your key metrics slide has 50 things on it, you need to re-think it!
* Choose your partners well to manage your cash flow.
* Can you afford success? If your costs are ahead of revenues, do some creative thinking.

Steve Parks (A selection from a more detailed post)

Started as 3 different businesses – Lovefilm, Screen Select and Video Island – all with the same idea. Lovefilm launched first, about a year later the other two launched. Lovefilm had raised £1m from angels, Video Island was venture backed with large funding of approx £9m-ish, Screen Select raised £2m via angels. But then all raised substantial money and went for aggressive growth. Businesses later merged.

Bootstrapping
In the early days of these businesses the boot-strapping companies beat the business that had most cash, but in later development the venture backed business was able to accelerate more rapidly. Screen Select had a cash burn of half (at £98k) of video island, but had more growth. The biggest difference was in hiring approach. Video island hired ‘ahead of the curve’ spending lots to get experienced talent. Screen Select looked for new emerging talent – which was cheaper. Video Island had outsourced to grow faster at significant expense, but then had to work hard to fix and adapt it. Screen Select had built everything themselves with a team of 3, which gave them a stronger platform – and that’s now the one used by all the merged businesses.

Cashflow
You have to pay for acquisition, approx £20 per customer. You then have to send them DVD’s which cost you, so you’re about £60 down. Then you get monthly revenues for membership, and customers breakeven after 9 months. It took William about 3 years to really understand the reality – which was better. You typically give a 2 week free trial, which costs, you send them DVDs – but you don’t have to pay yet – you can use credit terms – so the customer actually pays before you have costs. So the cashflow is better than expected – and the customers actually provide you with funding!

How to scale
Culture is critical, communication is important. keep business simple – focus, focus, focus. Scaling beats revenue and profit – important beats urgent.