Geek n Rolla: WReeve Bootstrapping, Scaling and Cashflow


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William Reeve's presentation at TechCrunch's Geen'n'Rolla in London. Lessons from (and other UK internet businesses) on bootstrapping, cashflow and scaling. Please note that confidential data has been obscured. Please contact me (via twitter etc) for copies.

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Geek n Rolla: WReeve Bootstrapping, Scaling and Cashflow

  1. William Reeve Serial entrepreneur and investor Apr 2009 TechCrunch Geek’n’Rolla Bootstrapping, Scaling and Cashflow
  2. About me More details: see or
  3. A brief history of LOVEFiLM (1)
  4. A brief history of LOVEFiLM (2) £££ subs
  5. Three questions this poses 1: How boot-strapping beat cash 2: How cashflow beat money 3: How to scale
  6. Bootstrapping in action SS vs VI Paying Subs +57% Trials DVDs rented Revenues +55% Cost of Sales Gross Profit Margin Free trial cost Marketing costs -2% Contribution to Overheads Overheads -38% E(loss) BITDA -60% DVD CapEx Cash Burn -49%
  7. Bootstrapping – VI vs SS Cost centre VI approach SS approach Hiring <ul><li>Hire ahead of curve </li></ul><ul><li>‘ Have done it’ </li></ul><ul><li>Hire behind the curve </li></ul><ul><li>‘ Could do it’ </li></ul>Technology <ul><li>Outsource for speed / credibility </li></ul><ul><li>12 months later – lagging platform run by 7 FTEs </li></ul><ul><li>Build inhouse </li></ul><ul><li>£10k bonus to key developer </li></ul><ul><li>12 months later: UK-class platform w 3 FTEs </li></ul>Prof svcs <ul><li>‘ Do everything properly’. PwC, Lathams, Russell Reynolds </li></ul><ul><li>£20k pm excl one-offs </li></ul><ul><li>‘ Get it done’. </li></ul><ul><li>£3k pm excl one-offs </li></ul>Finance team <ul><li>1x £1000pd, 1 mid, 1 jnr FTE </li></ul><ul><li>1x £400pd, 0 mid/jr FTEs </li></ul>Marketing <ul><li>‘ Do cheaply via White Label’. Target SAC: £20 </li></ul><ul><li>Albion </li></ul><ul><li>‘ Do inhouse’. Target SAC: £15 </li></ul><ul><li>Performance-only </li></ul>Exec team <ul><li>3x </li></ul><ul><li>2x </li></ul>
  8. How not do to it
  9. How we were doing it 9 months later
  10. Expert advice, collated <ul><li>“ Re-negotiate all contracts (especially landlord) - suppliers will bend over backwards not to lose you” </li></ul><ul><li>Review inhousing vs outsourcing </li></ul><ul><li>“ When it comes to spending on something (e.g. hiring another body) if in any doubt - say 'no‘” </li></ul><ul><li>“ Try going to some of your potential customers very early and getting them to pay in advance and financially support the development of the product in return for a steep discount” </li></ul><ul><li>“ Avoid Reed & similar for temp tasks - use hourly freelancers from e.g.” </li></ul><ul><li>“ Apply for R&D tax credit for development expenses - in XXX’s case £37k last year, £50k this (if we get it) of cash funding from HMRC” </li></ul><ul><li>“ Investigate fully what ‘free’ money you might qualify for – tax credits, subsidies, loans, etc.” </li></ul><ul><li>Watch solvency of your creditors and be careful who you extend credit to </li></ul><ul><li>Avoid physical automation like the plague </li></ul>Source: CEO/COOs running my portfolio’s (internet) businesses
  11. How cashflow beat money
  12. Our original thinking re cashflows
  13. The reality: pro-forma cash flow per net new customer
  14. We obtained £4.5m of funding by managing our cash conversion cycle + +
  15. Cash conversion tips <ul><li>“ My only tip is to establish personal relationships with all the people in the accounts dept - those who will chase you for money. Call them by name, and always return their calls promptly. Don't hide. Also pay the first bill on time. </li></ul><ul><li>Once you establish that of course you will pay but that it is all a bit of a game, then this buys you a lot of credibility and time.” </li></ul><ul><li>CEO of a 2 year old profitable startup </li></ul>
  16. Centralise cash conversion process on Finance <ul><li>Make sure you have the right person in Finance </li></ul><ul><li>New account creation </li></ul><ul><li>Credit limits / payment terms </li></ul><ul><li>Lower the ‘double signature’ limit and use CEO as excuse </li></ul><ul><li>Payment timings </li></ul><ul><ul><li>+1 day per month </li></ul></ul><ul><ul><li>Payment run timings </li></ul></ul><ul><li>Clear KPIs to the whole finance team </li></ul>
  17. Customers can help too <ul><li>Re-examine your proposition </li></ul><ul><ul><li>Cf PAYG phones </li></ul></ul><ul><ul><li>Breakage </li></ul></ul><ul><ul><li>Free trials </li></ul></ul><ul><ul><li>Deposits </li></ul></ul><ul><li>Offer deals for cash-flow-friendly offers </li></ul><ul><ul><li>Pre-paid discounts </li></ul></ul><ul><ul><li>Gifts </li></ul></ul>
  18. Supplier credit <ul><li>Payment partners </li></ul><ul><ul><li>Deposit negotiations </li></ul></ul><ul><ul><ul><li>Growing businesses want ‘ £X’ </li></ul></ul></ul><ul><ul><ul><li>Flat/falling businesses want ‘X days’ </li></ul></ul></ul><ul><ul><li>Exploit internal tensions at your partner </li></ul></ul><ul><li>Marketing partners </li></ul><ul><ul><li>Performance-linking is a form of credit </li></ul></ul><ul><ul><li>Run via monthly/quarterly statements </li></ul></ul><ul><ul><li>Use minimums creatively </li></ul></ul>
  19. How to scale
  20. How to scale? <ul><li>Culture </li></ul><ul><ul><li>There is no ‘Scaling Director’ </li></ul></ul><ul><ul><li>CEO must own scaling </li></ul></ul><ul><ul><li>Scaling is like blonde hair. </li></ul></ul><ul><ul><li>Communications </li></ul></ul><ul><li>Keep business simple </li></ul><ul><ul><li>Focus focus focus </li></ul></ul><ul><li>Scaling beats revenue and profit </li></ul><ul><ul><li>Important beats urgent </li></ul></ul>
  21. Questions? <ul><li>William Reeve </li></ul><ul><li>[email_address] </li></ul><ul><li> </li></ul><ul><li> </li></ul><ul><li>+44 7970 290 690 </li></ul>