“I lost my integrity.” That’s Mike Salguero describing what it felt like to run his first startup under the thumb of its investors. When he built his next one, ButcherBox, he refused to take a dollar of outside money. He’s now expecting more than $600 million in revenue this year.On the latest episode of Masters of Scale, Salguero describes what happened at his first company, CustomMade, a custom-goods marketplace he scaled to 60 employees on roughly $30 million in venture funding. When the marketplace model stopped working and he wanted to change course, his backers pushed hard the other way.“I thought I knew what was better for the business, but when you have top VCs telling you what to do, it carries weight,” he said to Masters of Scale host Jeff Berman. “What they don’t talk about is the phone calls where, ‘if you guys don’t do what we say, you’re probably going to be blackballed. You probably won’t be able to raise money again.’”CustomMade was acquired by Wayfair in 2015. When Salguero started ButcherBox weeks later, he took no outside money at all. “I don’t think I’d be around right now if I had raised money,” he says. There are three reasons his bet paid off. Each one is echoed by other founders who made the same call.
1. Bootstrapping can still reach real scaleThe belief that you need venture capital to build something big doesn’t always hold. Ben Chestnut built Mailchimp without raising a dollar, and then sold it to Intuit for roughly $12 billion. He walked away from VCs for a reason Salguero would recognize: They wanted a different company. “It felt like they were more like alien beings from another era trying to tell me how to run my business,” Chestnut said on his 2019 Masters of Scale episode. They pushed him toward enterprise clients; he wanted to “empower small businesses to scale out of the kitchen.”