Erica Jain is the Chief Executive Officer and cofounder of Healthie.
Writ large, we still live in a “venture-first” startup culture. This means that most startups, most of the time, believe that they need to raise money from VCs and spend it in 12- to 18-month cycles in order to grow. The truth is, there’s another way: focusing on profitable, sustainable growth.
The good news is that this “venture-first” culture is shifting, given the current economic climate; this is especially true in healthcare, which saw a gluttony of funding in ’21 and a pullback in ’22. As happens in economic cycles, founders are shifting their mentalities and expectations. But the pendulum needs to continue to swing toward fiscal prudence and startup stability over a growth-at-all-costs mindset.
At Healthie, we’ve raised two total rounds of capital over eight years, been profitable for most of that time and waited five years to raise in between our Seed and Series A rounds. We’re proud to say that we’re a double-digit, million-dollar revenue company and growing.
We got here by disembarking from the venture-capital growth train, ruthlessly focusing on our customers and focusing on cash efficiency. In short, we focused on profitability for most of our existence. That focus laid the foundation for our growth.
Why should you go profitability-first?
The biggest reason is that focusing on the bottom line forces hundreds of other decisions around go-to-market, product, personnel and spending, which, in totality, focuses your entire company. That focus goes hand-in-hand with a developed confidence that you can sustain your own business without outside capital. There are few other more freeing feelings in the world than knowing you’ve built a sustainable business.
It’s a bit uncanny—but focusing on unit economics and the right growth is the true path to taking on capital later and scaling quickly down the road when you need to. You may be able to benefit from the profitability-first approach for a few reasons.
It forces you to be cash-efficient.
Without the large injections of cash from capital rounds occurring on a frequent basis, your startup is forced to get the most out of every penny. This crunch, in turn, forces you to focus on delivering real value to your customers sooner and with greater cash efficiency.
At my company, we spent years “in the trenches” with customers—on sales, support and success calls—so that we could truly deliver what our customers wanted. While our growth curve (i.e., speed) perhaps did not match a traditional venture growth one, we were comfortable with that pace because it matched our cash efficiency curve.
It helps you build lean processes.
The downstream of the profitability decision is lean processes and hiring. When your customers’ satisfaction and loyalty are the keys to keeping your lights on, you’re forced to figure out how to do more with less.
At my company, we initially spent money on unnecessary hiring, especially in sales. This not only separated us as founders from the customers, but it created go-to-market bloat. We corrected this quickly and charged forward.
It takes time to find the right balance between people and processes—but either way, it’s often more harmful to spend money quickly and “figure it out later” than it is to stay lean and force the hard decisions early on.
You will have room to make mistakes on a smaller scale.
Taking on capital too quickly often means your company grows too quickly. When you inevitably make mistakes, those mistakes are multiplied across a company not right-sized relative to the potential mistake’s impact. Pivoting and making wholesale strategic changes becomes very costly.
For example, at one point, my company had to do a full rebuild of our platform—all while supporting hundreds of customers. Without the pressure to scale overnight, we were able to go through that transition at our own pace and in a way that best met our customer’s needs. This rebuild helped turn us into the platform we are today.
Why did we take on outside capital in 2022 for only the second time?
Healthie is a SaaS company creating critical infrastructure for virtual-first care delivery. Our business was picking up steadily before the pandemic, but when it all hit, digital health funding boomed. Overnight, virtual-first care delivery became top of mind for the whole industry. As such, the demand for our product boomed, especially since we were a stable and somewhat known player.
At that time, we’d been in business for almost six years and felt we had laid the foundations for a strong company that could take on a substantial amount of outside capital. In short, we were ready to grow responsibly. We knew that additional capital would enable us to grow quickly while also best serving the market’s needs. 2022 was our strongest year to date, and we grew our team substantially. That growth continues today.
In the jungle, there’s a time to graze and a time to pounce. We waited for our moment, and when it came, we jumped on it to get the best talent and scale with our new customers.
Why is faster not necessarily better?
The recent layoffs and austerity measures across the economy—both private and public—show us that companies have paid for growth in ways they likely shouldn’t have. But there is also a deeper shift back toward unit profitability over growth at any cost. With new innovations like AI, the hype cycle may begin again, and founders may once again feel the pressure to grow as capital returns to private markets.
Remember that in the end, it’s not just patient capital that wins out; it’s patient founders. It’s up to you, the company leads, to set the tone and culture for your company. You created your company to change the world in some way—you can only ever deliver on that change if your company is alive.
Building a culture of sustainable growth may seem counterintuitive in “hot” markets, but it’s the only way to ensure your company’s impact in the long run.
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