Hari Ravichandran has launched several companies over the years. One of his biggest success stories is Aura, which provides individuals with a personalized, proactive suite of data-protection tools.
Here, the Aura Founder and CEO talks about starting his company and offers advice for founders who are building and scaling startups in volatile times.
In 2014, I was denied a mortgage. I couldn’t understand what went wrong. My credit had always been good. I paid my bills on time. But, it turns out I was hacked, and it caused my credit to plummet. I spent two weeks trying to figure out what happened. When it was all said and done, I was left with more questions than answers. I wanted to make sure that something like this never happened again, so I looked for a preventative solution for all my connected activities. I ended up with seven or eight different products, and I still had vulnerabilities. I looked at this experience and thought, “If I can’t solve this, there are probably millions of people who can’t figure out where to start.”
In the early stage—before you take any money—make sure that your biggest and best source of funding is your customer. This means the business has product-market fit, which is critical. The more revenue you generate from your customer at the front end, the better it is for you as the entrepreneur, because you don’t sell down as much to the [venture capitalists], and there’s less dilution.
As a result, you end up owning and retaining more of your company. I don’t think you’ll find a single entrepreneur—including myself—who has a successful business and wishes they own less of their company.
Before you get out there to raise capital, you want to look at your own house and make sure that it’s tight, right? Are you an efficiently operating business? A lot of times, what you find is that you’ve overbuilt and there are areas where you could operate a little bit differently.
And if you want to raise a lot of capital, extend your runway. If you’re about to hit a wall, take the down round. Even now in volatile times, people are still making investments. They’re just not making them at the same valuation they were in fruitful markets.
Depending on the stage, you want to try and keep your burn rate to below one, if you can. Don’t spend more than you’re on track to make. Let’s say you have $1 million of revenue and you’re growing at 100%. You’re going to generate $2 million next year. Your growth is $1 million. Try and keep your burn to below $1 million as you ramp up.
Typically, especially in this environment, a minimum of 24 months of runway is an important number. Building is just hard, and always takes longer than you think. As you go, you will find problems that you didn’t anticipate having to deal with, and you want to make sure that you have the runway to absorb the shocks.
Great franchises—like J.P. Morgan—add credibility to a new company. A young company being able to borrow the brand halo from a credible investor is critical.
"When you tell people, ‘Hey, J.P. Morgan has done their work, and they’ve put capital into this venture,’ it lends a lot of credibility to us as a company." - Hari Ravichandran, Aura Founder and CEO
We think we’re pretty well-positioned. We raised a lot of capital last year, and a portion of our business, The Pango Group, which is a portfolio of digital security point solutions, is very cash flow-generative. We’ll probably do between $90 [million] to $100 million in cash flows next year. Our growth business, the Aura business, is growing by 35% to 40%. And as we look forward, we will continue to focus on the things that create value for the business.
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