“Raising Money is Not Making Money”

“Raising Money is Not Making Money”

“Raising Money is Not Making Money”

SCOTTEVEST continues to grow in the current economy. Right now, there are countless “entrepreneurs” trying to grow really big, really quickly, by “selling money” rather than building lasting value. It can feel like a get rich scheme rather than a solid business model, and it leads me to ask the question,  “Are you an entrepreneur or are you a small business owner?”  Try to guess which one I consider myself to be.

This question leads to a series of more questions. You must identify what your goal is when you start a business. Is it to grow big and sell, or is it to make money every day? These are ultimately two completely separate business models, and I have taken the latter with SCOTTEVEST. I started this company with a loan secured by my house, knowing if I failed, I would go bankrupt. I had to hire people and provide them working salaries (myself included). I knew that everything I did, every activity I did THAT day, had to make us money, because if it wasn’t making money, it was costing money. My money. Thankfully, with a business run on the internet, I could easily find out how I did that day so nothing went unmonitored.


Let’s look at the other business model mentioned; growing big to sell. Companies such as Bonobos work hard to keep their investors happy. We have a great relationship with Bonobos, but they have a different goal than I do. They are massively successful when you look at their valuation and how much money they’re raising, but that is separate to how much they’re making. Bonobos has raised $70 million (these are publicly available figures) but they are not yet profitable. I would guess that they have probably sold about $50-$70 million dollars in products by this point, but if they would have initially sold pants to all their stockholders instead of selling them stock, they’d be ahead of the game and turning a profit. It is one way of doing business – and they are GREAT at it – but I chose the alternative.

When I look at other investor-funded businesses (particularly app developers) it makes me sit back and ask, “Are you in the business of growing a business, or in the hope of growing a dream?” They may eventually have a viable business, but what is their business model? Is their investor pitch team better than their operations and marketing team? When you’re in that type of cycle, what is the measurement of success? What is a win? Is it raising more money? It’s a constant cycle. At some point however, you’ve created a critical mass and someone will want to buy that brand, which seems to be the point of their existence. It’s one way to do it, but it’s not my way.

We’ve been in business for thirteen years and we have not had a single quarter where we’ve lost money. We have had times where we’ve had difficulties, but we continue to come out on top through hard work and watching what is working and what is not working every single day. This makes me question the strategies of a lot of these companies who don’t have a revenue model. I firmly believe you can make money and grow your brand at the same time, but it requires a different way of thinking about business. You know… by thinking of it as a business. If you would spend more time working on your business rather than attempting to raise money for your company, you would be much better off. In my case, I would rather be spending that time on PR and getting the word out – that is golden and that is what truly drives business.

Public speakers

For a countervailing argument, let’s look at Facebook. I do believe that they initially needed to build up that critical mass before they were able to gather the advertising needed to support themselves financially. Another example, that strikes me is a company called Zoza, who (perhaps not so) ironically is no longer in business. They spent $10 million ten years ago building a website that I spent $5,000 building. I don’t even think to this day we have spent even close to that much on our website… in total. This mindset of spending other people’s money without accountability for bringing in a greater amount of immediate revenue seems to get these types of companies in trouble.

Before I started SCOTTEVEST I worked for an internet company called Next50. It was started primarily by one guy who came from a big investment banking firm who basically said, “the best thing about these internet companies is, it doesn’t matter if you make money, they just want to see us spend money!” While I was with the company, we raised $3 million right before the internet bubble. We spent that much of other people’s money within a year, but didn’t have a penny of revenue to show for it. People were throwing money at anyone who could set up a website, and that was the common mentality before the internet bubble popped. I ultimately had to quit because I was not okay with that business model.

Something else to consider – do you grow the top line or the bottom line of your company? My premise is, you grow the bottom line. And if you need to grow the top line to grow the bottom line then so be it, but do NOT forget the bottom line. That is first and foremost. Be able to embrace what makes the internet so unusual; the fact that it allows the immediacy of reactions, and use this to your advantage. Anytime you’re dealing with “internet experts,” you will probably hear them say. “things take time, a CPC campaign on Google needs to mature”. Bull. That’s when I say, NO! You make a change and the next day you see the results and you adjust and adjust and adjust until it’s right. Don’t lose track of the bottom line, and don’t be afraid to course correct early and often, and insist on your vendors keeping up with your pace… don’t let them slow you (and your business) down.

Another important lesson I’ve followed is, “As a business, you need to grow or you will die, but make sure you don’t die growing.” To run a successfully growing business is difficult, so we have chosen to grow organically with SCOTTEVEST. We have learned to follow the demand rather than expect it. Where we have failed in recent history was surrounding my appearance on Shark Tank, particularly in the build up to the event.  We grew in anticipation of the actual demand that we expected to come as a result of my appearance, but the results were not that immediate. In my opinion, you’re much better off staying behind the demand. Worst case scenario: you embrace a scarcity model and put in some extra hours. In our case, we may run out of a product but it continues to prove that people will come back if the product we offer is good quality and useful.


Coming back full circle, I want to emphasize the fact that for us, every sale counts, every customer counts, everything needs to be measured in a bottom line capacity. If you’re ready to start a business but you’re so focused on trying to raise money, you might want to readjust your model. If you’re going to start a business and you’re ready to risk everything, go for it. The worst case scenario is that you might go bankrupt, and if you are a good businessperson, you can even bounce back from that. They don’t put you in jail for failing, but you’ll never succeed if you don’t try.

I’m outta here!
SJ headshot
-Scott Jordan, CEO

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