When someone offers you US$5 million for your start-up pre-revenue, most founders would take the offer, celebrate, and post on LinkedIn about their new chapter in life, but we aren't.
In the past we would have - my other ventures in med tech and consumer messaging were acquired at lower valuations, after years of ill-fitting market approaches and difficulty with customer dynamics. The products were great, global, and used by hundreds of thousands of people, but they didn't quite hit what defines a truly successful tech venture. Most founders will hit the same hurdles.
When you approach your third tech start-up it comes from a completely different perspective. What do markets want, what will they pay for, how can they scale, and how can you find this well before you release a product that people might actually use.
Those experiences have shaped how we've approached Cloudhound. Almost from the playbook of Peter Thiel, we've targeted a global market share from day one, with a product that 10x's all competition, with a go-to-market strategy that was formed before any product ever reached MVP.
Here is why we turned down an early acquisition:
1. We are targeting a global market from day one
Most Kiwi founders start locally and scale outwards without realising just how small New Zealand is compared to their global opportunities. The US alone has a GDP 110x larger than New Zealand at US$29 trillion, and the EU and the US combined is over $50 trillion. CloudHound was built with these markets in mind.
Build for New Zealand, but at the same time build for the world. While you might validate here, immediately target larger markets if you can. If there is a way to get there, a token pre-revenue offer could be nothing compared to your global reach.
2. Being completely bootstrapped gave us the freedom to say no
Many Kiwi founders chase VC funding as a goal in itself, but it's a means to an end. If you can go without it and still succeed, you should. Consider it only if it is crucial to your long term vision, and only with an investor that can provide you with more than just money.
VC funding is a blessing and a curse. It locks you into your investors goals, not your goals - you may scale prematurely, you may target short term results, and if an early exit arrives, you might be forced to take it. If you can bootstrap, you should consider it.
With CloudHound we have avoided third party raises despite significant interest, giving the freedom to make decisions that align with our long term values and ultimate goals.
3. This Is a golden era for high-value, AI-enabled tools
If you are in this space you should realise what a golden age we are in. Large players are under pressure to buy or build their own tools to compete. If you have started or are starting an AI-enabled product with vision, know that enterprises are struggling to innovate and you have flexibility and the opportunity to come out ahead.
With CloudHound we have hit a perfect storm, where high quality technical foundations in addition to AI-enabled technological advancements can achieve results that have never been possible before, giving you a massive head start over incumbents.
Keep this in mind, and know that what you are building may have much more value than you think.
4. Early buyer interest validated that we were still undervalued
If you get early offers pre-revenue, it means you've hit product market fit. It doesn't mean sell now, it means you've reached market validation. You're solving a meaningful problem and other companies are willing to pay to capitalize on your success.
Early interest means you're on the right track. If you're willing to stay in the game and you have more than one potential acquirer, you should continue and see what more value you can bring to the table - and you can always come back to an offer to re-evaluate.
5. It's a real and tangible Issue that we're solving
With CloudHound we've hit a problem that's real, tangible, and needs to be solved - we only do cloud migration assessments, but millions of dollars are spent each week that could be solved with better planning and discovery, and everyone knows it.
If you have found a niche and can do it far better than your competitors, or if you manage to create a completely new market with your invention, you should consider continuing - offers are an indication that you are doing the right thing and that maybe you should accelerate.
For founders in New Zealand, you're building at the best time.
Great talent, with a golden opportunity that only comes every decade, and the ability to build something valuable and meaningful. Target value, and revenue, don't limit yourself to New Zealand. Be careful with equity, and go for global adoption from the beginning.
Focus on a product that solves real problems, reduces friction, and can scale, and above all remember it's not necessarily about the technology, but your execution.
