Greg Head of Scaling Point on Changing Startup Funding and Drawbacks of Venture Capital Funding

SPEAKER_1 (0:03)

All CEOs, me included, we don't actually know what we're doing.

David Paul (0:05)

They're all sharks, so all you got to do, though, is no shark bait. I don't think we've ever talked about this before.

SPEAKER_1 (0:10)

We can capture all of the walled share.

Greg Head (0:12)

First place to start is with the product.

SPEAKER_1 (0:14)

That's just the first nut.

David Paul (0:21)

This is The Capital Stack.

Hey, everybody, this is David Paul, the host of the Capital Stack Podcast, where I talk to founders, operators and investors about all things value creation in startups. Today, I am talking to Greg Head, the founder of Scaling Point, which is an advisory firm, and also the Practical Founders Movement, which involves founders getting off the VC train, which is something I've been trying to preach. Greg does a better job, he's a better marketer than I.

Greg has got a very long history, both as an operator, as an angel investor, he's spent some time in being the Chief Marketing Officer at a little company called Infusionsoft in Arizona, as well as some other big legacy platforms. Greg is kind of a dinosaur, honestly. It's like the Tyrannosaurus rex, I like coming back from the Jurassic times. But Greg knows marketing, and that is timeless. So Greg, how are you?

Greg Head (1:41)

I'm doing well. Did you just call me an old guy with the Tyrannosaurus rex? Okay, well, good.

That means I'm bold and wise. I've been doing this for a long time.

And the marketing thing at Infusionsoft was the last thing I did, the last, let's say it was 2011, 2015, so about 10 years ago, that people remember me by, but I've done everything in the software business except code for just about 30 years. And now I work with founders all over the world who are not just, you know, keeping, not just staying off the drugs, but not heading there in the first place for the big VC funding. There's plenty going on there.

David Paul (2:18)

You're like the just say no for VC funding.

Greg Head (2:21)

Yeah, that's true.

I played the game for a long time, and I've won that game. I helped start a company in the 90s that grew up to be one of the CRM leaders in the early days. We went public and it was a big deal. We made the funds back in the day and sold that company that was SellsLogix. We sold it to Sage eventually and to Phoenix. And then Infusion Software also raised, but didn't sell and didn't pay back for the investors or founders in there yet. So you can win, you could lose, but the game has changed so much, David, in the last 10 years, five years.

And that's what I've noticed. So I used to be in Phoenix with you, helping folks work towards the VC funding model, the pitch decks and what to say to VCs and connections and all that stuff. And we've both seen how the software game has changed. You just don't need that like you used to. So it's not, there's all kinds of ways to create valuable software companies these days. And VC funding should be used in small doses only when it's really appropriate, like opioids, right? You shouldn't prescribe it for every time you have a headache.

And it's pretty serious drugs, as most founders who raise big funding figure out.

David Paul (3:30)

And they just don't know it. They just don't know it and they take it.

Greg Head (3:34)

That's partly the game.

David Paul (3:35)

Well, they know that it makes them, they know that they're supposed, or they're quote unquote supposed to, because that's what the narrative said.

Greg Head (3:44)

Right, the narrative. And so I was part of the narrative. And in the 90s and the early 2000s, that was kind of the game. You needed to hire 15 people at RD and 10 engineers to build a client server Windows app and stack up the servers in the collocation center and so forth. You just don't need to do that these days. And there's no software founder that has ever told me otherwise. It takes about 10 times less coding effort to build a commercial application and get into revenue, which is another form of funding, than it did 10 years ago. Like it's just amazing, and AI is making this easier. So that's just one of the things that's changed in the last 10 years.

You don't need another round of funding to go to market if you know what you're doing.

And that's another thing that's changed. Another one is you can get to 1, 2, 3, 5 million ARR, annual recurring revenues in SaaS, and get into very interesting or life-changing wealth scenarios. And that didn't used to happen.