Despite how popular media seems to suggest a business owner needs an investor, a small business loan, or a lot of capital to build a successful business, John Sperry of InMoment would disagree. I recently spoke with him about what it takes to build a successful small business—a tech company no less—without venture funding or a lot of outside capital. You might be surprised at what he has to say.
Ty Kiisel: John, maybe you should tell us a little about what you do.
John Sperry: InMoment is an online platform designed to give companies a way to listen to their customers and optimize the customer experience. That experience is a combination of moments with sales people, products, customer service, and others—basically anywhere and everywhere a company touches a customer. Those experiences can be transformed into powerful relationships when employees are empowered to own their individual experiences with those customers. We facilitate that.
Ty: You didn’t go to the Shark Tank or venture fund to start your business, can you describe how you got started?
John: The dot-com I was working for was closing the doors and a number of us stayed around to close it out. About that time, I admit to being a little jaded about jumping into another tech company, so I decided to start my own. I used some personal savings and some help from my dad to get things off the ground.
Ty: So you basically bootstrapped your startup?
John: My dad offered me a storage area (for free) in one of the buildings he owned so we had a space to work and my savings allowed me to get started. I had recently been introduced to the idea of mystery shopping for hotels, restaurants, and resorts, and being a tech guy, felt like I could leverage technology to streamline and automate what was then a very manual process for collecting and analyzing data around customer experience.
Ty: With no income and no real capital to speak of, how did you assemble a team to pull it off?
John: Opportunities come at the edge of failure. I wasn’t the only one left without a job when my previous employer went out of business. Several of us decided to put our collective brainpower together and prove whether or not we could build a working pilot—knowing that we would all be working without pay for a while. Additionally, along with us, 500 CTOs lost their jobs in the second quarter of 2002, so we figured working on an exciting project was much better than sitting on our hands—even if it meant sacrificing a personal salary.
Ty: But don’t you need operating capital to run a business?
John: You have to find creative ways to work on the cheap without the need for a lot of cash. Fortunately, my dad wasn’t charging us for the storage area where we were doing business, we were able to capitalize on a tough job market to get the talent we needed to incubate a business for next to nothing, and we worked very hard to reduce our costs.
For example, by taking a very expensive IVR (Interactive Voice Response) system, via the telephone, online, we were able to reduce our cost per customer survey response from $.60 for every interaction to $.06. We did a lot of things like that to make it less expensive for us to do business. Some of those things even helped improve our ability to build the best product in the end. We had to do a lot of outside-the-box thinking, which was very good for us. We used web technology leveraging our skill set but also leveraging the latest technology. This was critical early on because we were able to use web developers to develop a phone technology and it allowed use to use the same structure when we eventually moved to Web based surveys.
Ty: You did reach out to a group of angel investors though, right?
John: Yes, we actually did have angel investors for a short time. Unfortunately, despite what was a great initial valuation, we fell short of our original revenue projections, so they cut us off. They wanted us to change what we were doing so we could generate more short-term revenue, but we all felt like it would hurt the business long term, so we decided to go it alone. Even though it meant we wouldn’t be able to pay anyone again. Our employees chose to be entrepreneurs and opted to keep going and forego another paycheck or two.
Ty: Nobody can do that forever though, wasn’t that a pretty tough decision for everyone?
John: Of course it was. At the time nobody was taking what would be considered a full paycheck, but everyone believed in what we were doing, we were gaining traction in the marketplace, and we were meeting with some pretty great companies—who, because they really believed in us, allowed us to stay alive.
Ty: Can you give me an example?
John: Great Clips. About the time our angel investors cut us off, we had a meeting scheduled with Great Clips who was very interested in what we were doing. They signed a contract with us that made us viable for the next year. Fantastic customers like Great Clips kept us alive in those early years. They believed in us as much as we did.
Ty: Over the last 12 years you’ve become a very successful company with offices in Birmingham, UK and Mississauga and Toronto, Canada, in addition to your offices here in the U.S. What advice do you have for other business owners?
John: We’ve worked hard, but we’ve also been pretty lucky. We saw an opportunity to make a difference in the market and I feel like we’ve been very successful. In fact, our success has allowed us to go back and pay those employees who sacrificed for us the back pay for all the paychecks they didn’t get in the early days. So I guess my first piece of advice is to make sure you hire the right people, treat them well, and don’t give them a reason to go anyplace else. You’ve got to reward the people who focus on the things that are the most important.
Ty: Would you recommend bootstrapping to other business owners?
John: I would. Bootstrapping gave us more options. It allowed us to reward our key employees with ownership and nurture the future leaders of our company. When you bring investors in, you give up some of your ownership—sometimes a lot of ownership. You also give up some of your ability to make your own decisions. While a lot of successful companies do it, I feel like a lot of what makes us a successful and unique company has been the fact that we haven’t had to change our business to accommodate any outside investors. It might not work for everyone, but it’s worked for us.
Too many times you think you need a lot of money in the early years. Prove your idea works. Work in the basement or your garage. While there are times when taking money makes sense, there are times when you shouldn’t. Don’t believe the myth of the Shark Tank—sometimes you’re selling your great idea for pennies on the dollar. Don’t take money before you’ve proven your idea.
Most small businesses need capital to grow and thrive, but as John suggests, “…there are times taking money makes sense,” and “…there are times when you shouldn’t.” I think that applies to borrowed capital too. Sometimes finding creative ways to build a successful business without a lot of outside capital can help you build a stronger business in the long run. It looks like it worked for InMoment with revenues approaching $50 million as listed on the Inc 5000 list for 2014 while increasing their footprint globally in Europe and Canada. They’ve also grown from roughly 50 employees in 2011 to 320 employees today.