Can you break into the $1B valuation cap and become a Unicorn company without raising venture capital money? Apparently, prove Qualtrics Founder & CEO Ryan Smith & Pluralsight Founder & CEO Aaron Skonnard, each founding one of the tech world's rarest mythical beasts: a profitable Unicorn company.
Born in Utah, each company was bootstrapped by its founder, achieved profitability, and scaled over almost 10 years to get to their incredible size, having just recently raised their first rounds of venture capital investment. Aimed at building a huge company, “the money is going to help with our scaling," agree the founders.
Watch Qualtrics Founder & CEO Ryan Smith & Pluralsight Founder & CEO Aaron Skonnard talk with Sarah Buhr of TechCrunch at Startup Grind Global 2016, and read our highlights below.
The Grand Plan? Don't Lose Money
There was “no grand plan to wait 10 years to raise our first round," claims Qualtrics' Smith. Avoiding venture capital, instead, was a function of location - Utah, where investors are few and far between - rather than the founders' beliefs. "We wanted to make money and build the company for the long term,” the founders agreed. At their current scale, accepting investment is also a pragmatic move: to truly take over the industry, the infusion of capital will help both Qualtrics and Pluralsight reach more people around the world.
Rather than having a plan to profitability, however, Smith and Skonnard perceive Silicon Valley's Unicorn obsession as a "race to raise money," not to build valuable companies. Slamming the gas pedal on a company that hasn't figured out its unit economics isn't healthy, argues Skonnard, because of the undue pressure it puts on the company to grow fast - maybe too fast. Bringing in money too early will allow investors to drive, or even "disrupt," the process of building the company, argued Smith.
So why are companies so hasty to raise money, if not for egos? Part of the challenge may be the vicious war for talent: if you're living, working, and fundraising in Silicon Valley, your money won't last as long, and talent retention will be a big part of the struggle.
Building for the Long Term
“I am going to give this venture 20 years of my life," pledged Ryan Smith. Already profitable and scaling quickly, what's next for Qualtrics and Pluralsight?
Maybe an IPO? Neither founder would say yes or no, but it could be a matter of timing. Skonnard argues the dynamics of the public markets aren't ready for another big technology IPO yet, but from the founders' comments you can sense an IPO is absolutely being considered. However, driven by growth rather than money, an IPO, too, would simply be a way of growing a long term business: "because you are ready to go public does not mean you have to go public,” noted Skonnard. Smith, however, is further along in his thinking, already structuring the company internally and optimizing its processes to test out running as a public company in the future.
At a time where being a unicorn means raising (and burning) a lot of cash generated by successively more aggressive capital infusions, Aaron and Ryan’s businesses look like white elephants: self-funded, fast growing, profitable companies who may one day go public and are being built for the long term.