What Pig Poop Taught Me About Growing a 20-Year-Old Business…


Don’t discount alternative funding sources and creative revenue streams. To get through the toughest times, companies must do whatever it takes.

6 min read

Opinions expressed by Entrepreneur contributors are their own.

In 2001, we were deep in the throes of the dot-com crash — a devastating recession that hit Silicon Valley hard. Mass layoffs happened daily. Even programmers, cherished by the industry, were let go in droves. In the end, investors ended up losing a staggering $5 trillion.

At my social-advocacy tech company, we went to extreme measures to keep the lights on. We implemented salary reductions. We cut staff. We took a loan from an investor. We even went into the business of pig poop.

You read that right: To bring extra revenue into the business, we spent several months shipping bags of poop all over the country. My fellow team members and I went to a nearby hog farm, gumboots and all. We scooped poop and packaged it in little plastic baggies. Then, we sold the “all-natural specialty fertilizer” through a dedicated website called piggypoop.com. Believe it or not, quite a few people bought the stuff. Despite the pungent smell, the product fit our brand’s values around natural, organic and healthy living. 

Related: Q. What Do Virtually All Small Business Owners Have in Common? A. Hustle and Sacrifice.

The bottom line: It’s never smooth sailing when you’re growing a startup. To get through the toughest times, companies must do whatever it takes. Over the past 20 years of growing Care2, I’ve considered and tried 26 forms of funding solutions, from angel investments to crowdfunding to the pig-manure side hustle. 

Here are four lessons I’ve learned about financing through two decades of boom and bust.

1. Investments are tempting, but revenue is best.

Raising lots of money is a sure-fire way for startups to generate hype and keep employees happy. And for a handful of businesses that need to dominate a marketplace fast, this can work out well. But I’m the founder of a mission-based technology startup that never fit neatly into the “go big or go home” model. From the start, we’ve upheld our longer-term vision to make the world a better place by tapping into market forces.

Running this social enterprise has convinced me that revenue — not outside investment — almost always is the best way to fuel a company. A critical cause behind the dot-com crash was an investment frenzy in startups without sound business plans or profit. Only 48 percent of all of dot-com companies survived through 2004, and those that made it nearly all ended up at lower valuations. If your business is producing revenue, the market is sending you favorable signals: You’re meeting a demand and your business strategy is on the right track.

Related: Implement These 4 Tactics to Grow Your Revenue

Furthermore, a revenue-first approach involves less (or no) equity dilution. So when it’s liquidity time, you and your team benefit financially — which moves us to the next lesson.

2. Equity is scarce. Preferences matter.

Over the past 20 years, an astounding 75 percent of Silicon Valley startup founders who secured venture funding ended up making nothing. And if founders aren’t cashing out, it’s certain none of the hardworking employees who helped build the business are making money, either.

While venture investments provide significant funding to a company, the equity has a “preference” associated with it: The investor gets paid back before common shareholders receive anything. So when a startup raises $20 million at an exciting $40 million valuation, the founders may feel as if their 50 percent share of the company now is worth $20 million. But if the company doesn’t grow fast enough and ends up getting sold for $20 million, the investors get paid back first — and the founders receive nothing.

Compounding the problem, most companies require multiple rounds of funding. In the early days of a startup, it often seems like there’s plenty of equity to sell and spread around. However, after several rounds, the founders’ share diminishes rapidly. Scarcity hinges on human nature, and founders realize they need to buy more butter only after they start seeing the bottom of the tub. One of the biggest lessons I’ve learned from my own and others’ experiences over the past 20 years is to fuel the business model without selling equity — as much as possible.

Related: 7 Factors That Influence Startup Valuations

3. Talk is cheap. Control is not.

A few years back, a venture capital (VC) fund’s backers wanted to invest $10 million in my company. Things looked promising during initial negotiations. The investors were supportive, encouraging and told us everything we wanted to hear. But when it came time to dig into the investment terms, it quickly became clear there was little shared risk.

The VC firm’s leaders wanted to de-risk only in their own favor. If something entirely beyond our control — such as a dot-com crash — happened, my entire team would likely lose their jobs and their equity. And the VC firm? In that sort of crisis situation, its investors would assume full control of my company and its destiny. I pulled the plug on the investment. Thank goodness I did. The great recession struck the following year. Had we signed that deal, all my worst nightmares would’ve come true.

Nice talk is worth nothing if the contract takes a different tone. Read the fine print. If you’re giving up control, there’s a good chance you’ll lose control.

Related: Consider Control and Voting Rights When Making Venture Capital Deals

4. Resourcefulness is key.

When I was growing up, a poster on my bedroom wall depicted a cartoon mouse pulling an elephant up a hill. The caption read, “Where there’s a will, there’s a way.” Looking back now, this image feels illustrative of much of my ownership journey. Resourcefulness is a critical, must-have quality. All the successful entrepreneurs I know are incredibly tenacious. They’ve found ways to achieve seemingly insurmountable goals through creativity, willpower and a refusal to give up. Our team has started and grown a business from nothing, proving our resourcefulness before we had any resources to leverage.

Each business situation is unique, so there are no hard and fast rules to decide which investments will be better or worse for a particular company.  I feel incredibly lucky to have survived two recessions and built a sustainable business model. It’s allowed us to re-invest more than $160 million of our own revenues into the business.

Related: 4 Resources You Already Have Are Enough to Crush Any Challenge

Not all of our investments panned out, though. Our sales through piggypoop.com ended up being less than worth the effort — and the consequences. Our distributor kicked us out of the warehouse after only a few months. As it turns out, manure packed into air-locked plastic bags expands when the organic matter releases natural methane.

Some ideas just plain stink. But if you keep trying, you’ll eventually come out smelling like roses.

Source link

About Rev_Rod

Check Also

What Is a Family Office and How Can It Help You Fund Your Bu…

[ad_1] The following excerpt is from the staff of Entrepreneur Media’s book Finance Your Business. Buy …

How to Prevent Your Software Startup From Running out of Gas…

[ad_1] Reader Resource Apply now to be an Entrepreneur 360™ company. Let us tell the …

5 Mistakes to Avoid When Seeking Startup Capital…

[ad_1] You could have an incredible idea for a new product, technology or business, but …

Leave a Reply

Your email address will not be published. Required fields are marked *