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Physitrack CEO: How to build a company without raising venture capital

August 14, 2017

Deciding to run your company funded by sales revenue instead of venture capital could be the biggest favour you ever did for your business. 

Henrik Molin, CEO and co-founder of Digital Health focused Apple MobilityPartner Physitrack Limited and former European Director of Marketing for hedge fund investment giant SkyBridge Capital, explains why.

The premise - Build a bullet-proof business without venture capital

Venture capital can be a great source of funding, especially if you really (and I mean really) need to expand your global footprint very fast to keep competitors at bay, or if you absolutely (and I mean VERY absolutely) need to keep an exceptionally high product development budget for an extended period of time to find product-market fit.

However, relying too much on VC money can put your company at risk of default much faster than you think if higher burn time lines extend too long, or if there is a change in the funding environment for your vertical.

The best way to hedge yourself against sudden end-of-runway death is to build a venture capital proof business. In the extreme, which was the case with Physitrack, to stay away from VC funding altogether and focusing relentlessly on building a client revenue funded business rather than participating in the capital raising rat race. 

Apart from guaranteeing longevity, there are multiple advantages to non-VC-funding and here are some of them that we experienced when we built Physitrack into a profitable and cashflow positive company.

#1: You will keep your priorities straight

"Effectively pull away the invisibility cloak of venture capital from revenue centric problems that you could afford to ignore for way too long."

If you make the primary goal of your company to generate positive cashflow - i.e. to make more money than it spends you will by definition create an all-weather venture. Meaning you will be immune to the comings and goings of venture capital trends, fads, illusions and bubbles.

By making this decision, you effectively pull away the invisibility cloak of venture capital from revenue centric problems that you could afford to ignore for way too long, and you will be forced to:

Be more realistic about your innovation - if you can't monetise even a minimum viable product in a reasonable time frame, you're better off doing something else. No amount of venture capital on the planet can save you if your product doesn't bring value to your customers - or to you. Better to find that out sooner rather than later - while you can still pivot your business, or while you have enough miles in you to start another venture. Living off sales revenue will force you to draw conclusions quickly - and not at the end of your runway.Be careful about what battles you choose - if your product does not generate revenue in a new country / market after initial success in your first market, even on a small scale, it is not ready / right for that market and you need to adjust it quickly before that battle loses you the war. With venture capital fuelling your uncertain expansion, you risk throwing good money after bad. Worst case, some VC sanctioned vanity metrics fool you into thinking you have product / market fit and you hold on - until you hit the last stretch of venture capital runway (more on KPIs below).Be more observant of customer feedback - if your product is lacking in features or benefits, few people will buy it, and you won’t be able to make money. If you don’t make money, you don’t survive. Fix the problem. Now. Not at the end of the runway.

If you don’t secure product market fit in a revenue-only funded company, you die, brutally quickly. Not when the last round money, or the next round money runs out. This will make you into an incredibly nimble and brutally efficient manager. Why? Because you and your team won’t have a choice to postpone your problems.


Well, consider the flip side: you buys yourself some extra runway with another VC round and you crash and burn anyway, taking your drive, your team and your reputation with you. Sound better?

It’s better to fix your money-making problem sooner rather than later - while you still have a shot at getting things right and everyone you need alongside you to make it work are still cheering for you.

#2: You can keep things simple

"Without venture funding, KPIs will not matter to you unless they make you money"

VC’s ask for and will keep you glued to Key Performance Indicators that (mostly) make sense to them because that’s what they need to put in their internal Excel models and slide decks. And because you have to when your VC investors ask you, you will spend a lot of brain power on figuring out metrics like:

Daily active users

Average time to sales

Lifetime customer value

Customer acquisition cost

Churn rate

While I am not saying that all of these KPIs are completely useless to you - it depends on what drives your revenue growth - what I am saying is that without venture funding, KPIs will not matter to you unless they actually make you money (or prevent you from losing money). Venture capital analyst-schmoozing KPIs that do not lead to revenue generation make no sense looking at.

Strictly speaking, the only KPI that you should really worry about is the good old:

Monthly Positive Cashflow = Monthly revenue - Monthly costs

As long as this KPI works for you, you are in business, month after month. If it stops working, or if you stare at the yearly cashflow generation, you can quickly go out of business. It's really as basic as that, so why make it more complicated? 

So: Keep KPIs simple.

(That said - you do need to grow your free cashflow and some KPIs are key for understanding your clients’ behaviour and how you can make more money on them and others like them so do take a close look at what KPIs are really relevant for cashflow growth and stick to them - but don’t get too bogged down with them at the expense of the monthly cashflow KPI.) 

#3: You will be more focused on what matters

"The outcome of your choices are immediate, not pushed to the bitter end of a potentially short venture capital-soaked future."

When you run any business, you are constantly faced with strategic Door A or Door B choices like:

Nice to have features vs Must have features

A diversified product family vs one money-making product

SMB sales vs Enterprise sales

Entering Country X vs Entering Country Y

In a venture funding situation, you have the luxury of quite extensive trial-and-error and going down several strategic paths with a bigger team than you really need, a richer offering than you really need, potentially in a multitude of geos (or one very large geo) at the same time. Door A vs Door B doesn't matter anymore, you can open them both. Hey, you can even choose Door C down the line. All you have to do is to find the right door at some juncture before you run out of runway (and/or control of your company, and/or your ability to issue more shares and/or to remain attractive with VCs).


That juncture can come up sooner than you'd like it, however, especially if a VC's favourite KPIs - growth and (eventually) monetisation - remain elusive and they have control of key aspects of your company. Even with money in the bank, you could be looking at a situation where someone else gets to run the show you premiered - and closes it before it hits Broadway.

With zero venture funding and an organisation geared towards profitability, you do have to choose the right door straight away, or you will go bust. The outcome of the choices you make are immediate, not pushed to the bitter end of a potentially short venture capital-soaked future.

Your main priority needs to be making sure your business only attempts to commercialise a product that has a high probability of working in the short term, in as few geos as possible that are easy to monetise. Anything more complex and you put your business at risk.


This gun to your head to focus will, however, bring you profitability faster, and although perhaps limiting to your VC fuelled world domination plans, will protect you from failure.

#4: You will keep your CEO focused on turbo charging sales

"Sales is what you want your CEO to focus on, not flight-jumping to deliver investor pitches, 3-minute conference quickfire showcases and endless networking."

A CEO shifting focus (back) to sales from capital raising will boost your revenue significantly. 

A CEO, especially a founder CEO, is the most powerful sales weapon a company can have, second only to a killer product.

Closing probability and time are generously skewed in the CEO's direction - what customer doesn’t want to interact with the visionary behind the business, the person that calls the shots, the hero that usually doesn’t have time for a sales meeting as he or she is too busy to make the world a better place, yadda yadda.

So: Sales is what you want your CEO to focus on, not flight-jumping to deliver investor pitches, 3-minute conference quickfire showcases and endless networking.

If you are a business development person reading this, you know what I mean: You always bring the CEO in if you can to give gravitas to your dealmaking. And more CEO time in sales rather than capital raising means more sales revenue.

In a VC funded setup, your CEO will be bogged down with relationship building, road showing and due diligence to close the next round, or explaining to existing investors why the company still is not generating revenue. Not to mention what your marketing people or CFO need to do - tweak pitch decks, KPI reporting and forecasts, or what your senior team members need to do - talk up the company in their due diligence interviews (because investors want to talk to everyone relevant, not just your founders and your C-suite).

Cut venture capital raising activities = Spend more time on sales = Make more money.

#5: You will run an optimally lean business

"You will have to run a leaner and tighter ship, as anything else puts your business at risk. Every penny not smartly invested is a penny closer to default. "

In a revenue funding focused company where positive cashflow is king, you will have to run a leaner and tighter ship as anything else puts your business at risk. Every penny not smartly invested is a penny closer to default. This means you will:

Avoid over-hiring and potentially having a large team of people do the same amount of work as a smaller team Avoid Parkinson’s law

 situations where people spend the time they are assigned / assign themselves on tasks rather than spending their time as efficiently / effectively as possible to make projects revenue generating as fast as possible.Avoid “we need to keep our suppliers happy” situations where you don’t review relative pricing, their work process, their own Parkinson’s law situation vs their cost, especially if you pay them per hour.Find smart solutions for outsourcing vs hiring if you foresee fluctuations in capacity needs - do you need to have X people working for you full time at all time? If not - cut part of all of them and buy services from external providers when you need them (given quality can be maintained).

Stay lean, mean and keep your suppliers hungry. Lower costs boost cashflow.

#6: You will build a more coherent corporate culture

"Everybody understands dollars and cents."

In a not-so-cushy non-VC setup, you will potentially be faced with tougher team management situations - especially hiring and firing as you need to maximise your resource utilisation - but on the flip side it will be easier to communicate success, failure and targets to your team. 


Everybody understands dollars and cents. Who really understands a range of fuzzy KPIs and what investors need / want to populate their Excel spreadsheets? Vanity metrics? For suckers (with you the biggest one).

Without VC funding, you will find that:

You can focus on building a transparency focused company - communicate with your team based on what is actually important for the business: Sourcing, generating and retaining client revenue. If in that transparent regime the team gets frightened about what challenges actually exist within the company - good. The true believers you need next to you will recognise challenges for what they are and stay in your team, while mercenary-type team members will leave you to mooch off someone’s VC money while it lasts. Their loss. Not yours.You can finally do what management books tell you all the time - hire slow and fire fast - because you have to. You can’t afford to make mistakes with “nice to have” staff when you are revenue funded. You will need to think twice before hiring and fix mis-hirings fast or they quickly turns into cashflow problems.

If everybody knows everything money-related that's going on in the company and how it affects them, you will build a very tight team with the people that stay with you.

#7: Keeps the founders and the team in control of the company

"Put your own interests and those of your loyal, money making team and early investors first, not the interests of a 7-year, 12% annualised return, “One home run and ninety-nine failures”-focused VC portfolio."

Lastly - with the revenue funding model you will find that you can call the shots in your business in a much different way than in a VC funding situation. If you are successful with the revenue funding model, you won’t have external powers in control of certain aspects of of your company (like firing you, your team or your revenue model). 

And hey, if after having gone though the process of making your company revenue funded you still feel you're missing out on something by not getting VC funding - perhaps your company thrives but needs to grow at a faster clip: You have a much greater chance of dictating the (usually VC skewed) term sheet terms for monetisation opportunities if you want to bite the bullet and get VC funding after all.

With key terms, I am talking about early investor-hostile preferred liquidation rights, capital controls, partial exits for early investors and founders, industrial exits (the most common ways for a SaaS company to be monetised) or - perhaps the biggest prize - the timing and size of a potential IPO.

If you have built a sustainable and cashflow positive business, you can put your own interests and those of your loyal, money making team and early investors first, not the interests of a 7-year, 12% annualised return, “One home run and ninety-nine failures”-focused VC portfolio.

When you have made it, all that hard work you put yourself through to build your bullet proof business will be more than worth it.


Physitrack is a revenue funded digital health company that was one of Apple’s first Mobility Partners. Physitrack provides patient engagement solutions to healthcare companies in 102 countries and developed the World’s first Telehealth solution for physiotherapy. It raised its last round - from family office investors - in July of 2015.

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