Startups and financing – How to get cash when you’re growing fast

By Heather D. Blease, SaviLinx

Financing is important for any small business. It’s critical for a fast-growing startup.

When I launched my company in 2013, I had the benefit of previous experience on what to do (and not to do) when starting up. I’ve founded multiple companies, two of which I’d call fast-growth launches: My first company grew to 2,500 employees within just a few years, and my current contact center company SaviLinx ranked 28 on the 2017 Inc. List of the 5000 Fastest Growing Private Companies. There are several things that startup founders need to do to be successful, but maintaining as much ownership and control as possible is paramount. Here are a few ideas to guide you through the financing early years.

Most founders understand the value of ownership, but when starting a company, trading a small percentage for angel, venture, or other capital is common. After all, what’s the harm in selling five or 10 % to fund the activity you need to grow? That’s only $50,000 or $100,000 of a $1 million valuation.

But what happens when you grow to $10 million, $100 million, or more? Those small percentages become very large compared with the initial investment. There is nothing wrong with seeking seed, venture, or other capital, but owners can do themselves a big favor by looking for every other option they can find before giving up equity.

Heather Blease

When I founded SaviLinx, I looked hard at my business plan and financials to see how much investment I needed to grow and bring the company to profitability. We grew very fast with commercial and government contracts, and that gave us a great start. But as a less than three-year-old company just coming into profitability, we still weren’t bankable. Traditional banks are not crazy about lending money or opening up a line of credit for a new company or until you have several years of profitability, so turning a profit became one of my most important metrics for growth. I started looking for the most efficient and cost-effective sources of capital.

In my case, I was an “all in” founder, which showed others that I believed in and was willing to invest in my company with everything I had. I emptied out my 401K multiple times to make payroll – scary but necessary.

Other options I took advantage of included state and federally funded economic development funds. These can be grants or patient loans, which offer you the time you need to ramp up. We’re headquartered in Maine, so I was able to tap into the Maine Rural Development Authority, the Midcoast Regional Redevelopment Authority, the Midcoast Council of Governments, Finance Authority of Maine loan guarantees, and other state-sponsored resources. On the federal side, we reached out to the Small Business Administrationfor help. There are many programs designed to help your business grow – take advantage of them.

Angel investors can be an option for more than just equity investment dollars – some may be willing to loan money. The money may come with a high interest rate price tag, but it might be all you need to get you through a tough spot without giving up equity. One state program we used provided investment tax credits for angel investors and this became an important incentive.

Another option that worked well for us was invoice financing. We had plenty of work, but were caught in a lag between getting paid and making payroll – we had to pay our employees before our customer invoice payments were received. We used a company called BlueVine as a solution to help us through a rapid growth period without giving up equity. They were very easy to work with and filled the gap until we were able to secure a traditional line of credit with a bank.

Today, SaviLinx is operating profitably and on track to hit over $15 million in revenue this year, its fifth year of existence. As founder, my ability to retain 85% of the company’s equity points to creative financing in the short term that prevented dilution in the long term. My advice? Turn over many financing rocks and seek out solutions that will help you start up and grow your business while helping you retain a bigger share of the ownership and control.

 

Heather D. Blease is CEO of SaviLinx, a strategic partner for customer service and tech support outsourcing. Exceptional agents use advanced technology and powerful analytics to help companies exceed goals, drive revenue, and stand out. SaviLinx supports technology startups, online retailers, government agencies, and other service-centric businesses from its contact centers in Maine and Mississippi. Learn more at savilinx.com.

 

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