After bootstrapping Reforge for 5 years, we announced yesterday that we raised $21M from Andreessen Horowitz and a group of engineering, product, design, and other leaders. We didn’t need to raise. Reforge is an 8 figure revenue, profitable company. As a result, I’ve had a lot of people reach out asking why we decided to raise capital.
Raising capital is a big decision and one I know many founders face. I've now done multiple venture-backed and bootstrapped companies. I've regretted taking capital in some situations, and in others have zero regrets. So why did we do it?
My Views on Raising Money
I figured I would first share my views on raising money.
Capital is a means to an end, not the end itself
First and foremost, I view capital as a means to an end, not the end itself. It is easy to get caught on the treadmill of fundraising round to fundraising round. But I believe capital is just one of many tools you can use to help you build what you want to build. The questions that I think are more important are:
a. What do you want to build?
b. On what timeline do you want to build it?
c. What resources do you need to achieve a and b?
d. What are the different ways to get those resources?
With a lot of alternative methods of financing coming online, the answers to these questions are becoming more numerous. For Reforge, we were in a fortunate position to be able to fund our growth with the cash flow of the business for the first few years.
The best path is what you want, not what the industry wants for you
I find people tend to be dogmatic about what is "right." Either "You need to raise venture capital if you want to build a meaningful business." Or "Raising capital is selling your soul." Honestly, both are bullshit. They are just manifestations of people saying what was right for them is right for you.
Venture-backed ≠ equal venture scale
Bryce Roberts tweeted this. Simply put, just because you are venture-backed does not mean you have a venture-scale business. Separating those signals is important to managing growth of your business responsibly.
Non-venture-backed ≠ non-venture scale
Throughout Reforge, I haven't had a single hiring conversation where someone didn't ask why we hadn't raised money. The reality is that in our industry, many think that when a company isn't raising money, they aren't building a big business. Once again, bullshit. There are tons of examples of companies that built >$100M revenue companies before raising capital. Atlassian, Mailchimp, Lynda, Pluralsight, ipsy, Simplisafe, just to name a few.
Capital closes doors but also opens new ones
Capital closes doors. There's no way around it. It reduces exit options, life/company flexibility, growth plans. You don't raise capital to grow incrementally. And you can't fire your investors. But raising capital also opens new doors. You can fund new initiatives, take more risks, and more. Being clear on exactly what is being taken off the table and what is being put on the table is important to making the decision that is right for you.
Why did we decide to raise?
So back to the core question. Reforge is profitable, earns 8-figures in revenue, has cash in the bank, is growing YoY, and I owned (pre-financing) the majority of the company. Many people would look at that and wonder why in the world we would raise money? Let's go back to those first core questions:
What do we want to build?
As we built Reforge, we kept getting signals that the opportunity was larger at every turn. What we found is that most modern business knowledge is trapped in the heads of a select few. That knowledge can help grow careers, companies, and our industry. But traditional methods of MBAs, corporate training, and conferences weren't even coming close to solving the problem. Most importantly, we had figured out a way to solve and scale it.
On what timeline do we want to build it?
Once we realized the above, we decided we wanted to bring this to a larger audience at a much faster pace. We were uncovering frontier knowledge across a few new topics per year, but we will soon be doing it across 30+ topics and many major functions.
What resources do we need?
The timeline that we want to build this in dictated needing more people and capital than our cash flow would be able to fund.
What are the different ways to get those resources?
We explored a few different debt and equity financing options. We ultimately decided to raise from a16z for a few reasons. Andrew and I have a great pre-existing working relationship (super hard to find). The views of a16z align well with ours. The network that Reforge and a16z have built can create a 1+1=3 situation.
In the end, we had something we wanted to build, on a timeline our cash wouldn't fund and found the partner we wanted to do it with. The piece this doesn’t recognize is the personal side for founders and what it means for your life. But I’ll cover that in a future quick take. If you are interested in joining the team, we'd love to chat.
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