Why it took 17 years to accept venture capital funding

Venture funding

When you’re in the Silicon Valley and surrounded by startups, unicorns and venture capitalists, it’s easy to be caught up in the hype around raising capital, billion-dollar valuations and massive exits.

Sure, VC funding can provide significant upsides, but it can be fraught with risk. There’s increasing pressure for startups to live up to their high valuations, as VC investment slows down and questions abound on whether we are in a tech bubble.

I started my company, Replicon, in 1996 with my wife Lakshmi, and it was only after 17 years that we decided to take on a Series A $20 million investment. People ask me all the time why we finally decided to accept VC funds after so many years. Replicon has always been profitable and while Lakshmi and I had been approached many times in the past, this was the first time we’d raised money from institutional investors.

For me, the question is not about “why didn’t you take VC funding sooner” but “why do you need to take VC funding at all.” Here’s my advice to any startup on what they need to consider before raising funds.

1. Make sure your idea truly fulfils a market need.

When I started Replicon in 1996 with my wife Lakshmi, it was a spur-of-the-moment decision, and our initial goal was to build a workflow application. But it took a few tries to get the product right. Our time tracking product – and the more comprehensive project and workforce management portfolio that we offer today – was born out of our own painful experiences as consultants from tracking our billable hours, client invoices and cash flow. We realized that if we were facing this problem back then, it was also going to be a huge drain for many other businesses.

While assessing the market opportunity sounds like a no-brainer, this is one of the hardest things to get right. For example, so many companies have imitated the “Uber for X” model in virtually every service – from grocery delivery, baby-sitting, laundry and many other services – but not all have been successful. Uber has done well because it services a high frequency need, and while its margins are razor thin, it’s able to keep going because of the high volume of drivers and passengers it serves in multiple markets.

2. Think of investors beyond their check books.

Our VC firms, Emergence Capital and Social Capital, are strategic partners for us. Their deep knowledge of SaaS and understanding of how to take enterprise companies to the next level has been invaluable to our growth strategy.

It’s critical to work with the right investor that can help you shape and focus on growing the business. While taking investment may seem like an attractive option, the funds should help to augment your startup, not distract away from it. It’s best to bring on a VC once the potential of your business is evident, and you’ve reached a level of growth and credibility in your market. This will help you pick the right partners for your business.

3. Don’t look at VC funding as the answer to growth.

The VC investment process is a complicated one and companies need to be prepared – and also know that being backed by a VC isn’t a guarantee of success.

Lakshmi and I bootstrapped for many years and in the early years, would take cash advances from one credit card to pay the balance on the other cards to get our business off the ground. While I wouldn’t want to relive that experience, a small budget forced us to be very disciplined and helped us develop the necessary bootstrapping skills to achieve long-term growth. I’m proud of the fact that Replicon has been built steadily over a period of time. When we did raise VC funds, we used it for very specific areas – including expanding in new markets (besides offices in Toronto, Calgary and Redwood City we also have offices in London, Sydney and Bangalore), investing in R&D and hiring top talent.

For many entrepreneurs, it seems that raising a VC round is the logical next step to success. But if you grow too fast and too soon, there’s a higher risk that you’ll crash and burn. Sure, bootstrapping for many years may seem risky as well. But I’ve found that the patience and persistence has paid off, and it’s been a steady journey in building a successful and profitable business.

Raj Narayanaswamy


Raj Narayanaswamy

Raj is the Co-Founder and Co-CEO of Replicon. Replicon provides award-winning products that make it easy to manage your workforce. With complete solution sets for client billing, project costing, and time and attendance management, Replicon enables the capture, administration, and optimization of your most underutilized and important asset: time.


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