The pursuit of venture capital can distort a company's growth trajectory. During the boom period from 2010 to 2021, many startups used venture capital to finance loss-making rapid growth – knowing the market for initial public offerings would enrich the investors and founders before the startup burned through its cash. 

In 2022, all that ended. The plunge in venture capital investment – down 35 percent in 2022, according to Crunchbase – revealed the perils of unbridled growth. CB Insights found that 47 percent of startup failures in 2022 were due to a lack of financing (in 2021 that percentage was a mere 24.) 

Many startups ignored the advice I gave in Scaling Your Startup: don't skip the second stage of scaling – Building a Scalable Business Model – in which you redesign your business processes to grow profitably when you take on more capital in the third stage – Sprinting to Liquidity. 

One company that did not skip that second stage is Cupertino, Calif.-based Splashtop, a service that lets businesses provide employees with fast, simple and secure remote tech support.

With more than 30 million users and 250,000 business customers, Splashtop was valued at over $1 billion in 2021 when it raised $60 million in capital. 

Here are five takeaways for business leaders from Splashtop's sustained success. 

1. Change your product as technology leaps forward

Business leaders should recognize that it is OK to launch a product that fails to scale as long as they cut their losses quickly and repeat the process until they have a product that catches on. 

Splashtop's product mix has changed several times in the last 16 years. As Mark Lee, Splashtop CEO, told me in a March 24 interview, the company went through many such pivots: Building a browser for netbooks, offering software to speed up the time for a Windows PC to boot up, and enabling consumers to access PCs from their iPhones. 

Ultimately, Splashtop pivoted to its current business – building software for remote IT support. 

2. Make happy customers your most effective sales force

To keep paying the bills during the search for a fit between their product and market needs, business leaders must run a tight ship. 

To do that, Splashtop sells while controlling sales expense by providing such a great user experience that customers tell their friends.

"To create customers who are excited to share our product with friends we deliver a wow user experience. They swipe their credit cards to buy. Our products have reliability and performance and our customers tell other people," Lee said. 

3. Use profits to finance your growth

If you have capital when your competitors are running out, you may be able to profit from the misfortune of poorly managed rivals. 

Splashtop did this by running a cash flow-generating business. As Lee told me, "We grew 200 percent in 2020 and raised $65 million in 2021 but we haven't spent it.

We make $10 million in cash flow a year. For many years, we had to bootstrap so we had to be efficient. Other companies are laying off people now to reduce their costs. We are looking at possible partnerships with some of them." 

4. Succeed as a big, happy family

Happy employees help your business to get and keep customers. 

To do that, Splashtop thinks of itself as a happy family built on trust. Lee explained: "We are like a family. We all graduated from MIT and have worked together for 30 years. We are still together – we have friendship and tightness. We believe that happy employees make happy customers." 

Building trust is the foundation for keeping customers and employees happy. "If people trust you, they buy more. We offer the best value, reliability, a good user experience, response to a customer question within a minute – faster than one to two days for the competition," he said. 

5. Build, partner or acquire to keep customers buying

Leaders must invest to keep their customers buying over time. 

Splashtop does this by encouraging customers to use its product well. "We guide users to try new features. That makes the product stickier," Lee said.

The company builds new products when it finds customer pain points where Splashtop can rapidly deliver a much better user experience. 

Splashtop recently acquired San Francisco-based Foxpass, a service that secures remote network access using identify management. Foxpass passed three tests: 

• Its product satisfies an important unmet customer need.
• Its customer-centric culture fits well with Splashtop's.
• Customers give its products high marks.

These five things can help your company sustain rapid, profitable growth.

 

Inc