It took us nine years until we got to the point where we had a profitable business.
Last weekend, Pluralsight took home Utah Startup of the Year at StartSLC’s inaugural Utah Startup Awards. We’ve told you about the importance of culture at Pluralsight. We’ve told you about their recent string of acquisitions — most recently Code School — signaling their rise from respectability to absolute titan in the tech education industry. But questions still remain. How did they go from unknown company to powerhouse in a 10 year span, all while retaining complete control of their vision, strategy, and culture? With the help of CEO Aaron Skonnard, who recently won CEO of the Year at the Utah Startup Awards, we found out.
“We started the company back in 2004, all of the founders put in $5,000 each and we just figured out how to bootstrap from there,” Skonnard told Beehive Startups in a recent interview. “We were all prepared to go a year or two without any income and so we had savings, we had kind of geared up for it.”
Over the course of the next nine years, Pluralsight and its founders — Skonnard, Fritz Onion, Keith Brown, and Bill Williams — made due with no outside funding, taking pride in cultivating a business that had its own unique culture, free from the influence of outside sources. As they shifted from a classroom-based approach to their current online model, Pluralsight was primed to explode.
“It took us nine years until we got to the point where we had a profitable business and we knew that we had built something that could truly scale,” Skonnard said. “We really cared about the culture, the lifestyle we were trying to produce for everyone involved in the business, and ultimately the vision of being able to teach and empower people and really be part of that life-changing thing for individuals.”
At a certain point, every company arrives at a crossroad: continue to bootstrap or seek outside funding. For Pluralsight, money wasn’t needed for operational cash flow, but rather to satisfy the demands of raising their profile, increasing brand awareness, and getting partners in place to help the next stage of their evolution.
“It’s called the classic entrepreneur’s dilemma,” Skonnard said. “When do you bring in outside money, if ever? You’re focused on building a successful business, you’re really passionate about the vision, about the problem you’re trying to solve. It’s always been a bit nerve-wracking to think about bringing in outside help or outside funds because of how it can typically change the dynamic and ultimately get control of the company, that vision and problem that you care about so deeply.”
With outside money on their mind, Pluralsight began to explore options, meeting with numerous VC firms in search of funding. Even as the game quickened, Pluralsight made one thing very clear: no amount of money was going to buy operational involvement, so don’t even try.
“We talked to all those guys, they were all interested but the thing we noticed very quickly was they all treated us like they treat their early stage VC investments, where we could tell right away that they were going to want a lot of operational involvement in the business, to put their hands on the steering wheel,” Skonnard said. “And that was exactly what we didn’t want to give anyone.”
Sounds like a hard bargain, right? We all know many investors who love being heavily involved with their investments, changing company culture and procedure like Roger Goodell randomly changing rules in the NFL. In some instances, change can be beneficial. For many companies, though, giving in to the demands of change is unavoidable — most can’t afford to play hardball when it comes to pursuing outside funds. They take what they’re given and give what they’re asked. Pluralsight is not one of these companies. They wanted money, but they would not wash away all the blood, sweat, and tears that got them there.
“It was just a really empowering thing for us; I mean not every business can do it this way,” Skonnard said. “But for us it was incredibly powerful because we were right at that inflection point where what the money actually provided was just all this additional fuel that allowed us to really accelerate that growth quickly — after we had figured everything else out.”
To ensure this acceleration, Pluralsight enlisted the services of three companies, strategically located in three drastically different environments: Insight Venture Partners, based in New York; Sorenson Capital, based in Utah; and Iconiq Capital, a Silicon Valley-based, semi-secret billionaire fund involving Mark Zuckerberg and friends. $135 million later, Pluralsight had its wings.
“We’ve proven this thing works, the vision is clear, we have a strong strategy, we have a strong executive team, and we don’t want to mess with any of that,” Skonnard said. “Iconiq doesn’t want any operational call — they want to bet on entrepreneurs and executive teams that they believe in and visions that they believe in. They immediately got ours, saw the track record, saw the success we’re having now and they believe we’ll have in the future and just said, ‘We want in.’ We were able to get this deal done without giving them a board seat. And in fact, the shares we issued and sold did not come with any voting rights so the voting rights on the new shares — the shares that transferred hands — stayed with the founders. So there was absolutely no shift in control in any way, shape or form with this $135 million deal.”
If you’re a company that has ceded control of operations in the name of financial backing, you’re probably shaking your head sadly right now. I can’t say that I blame you. It seems almost unfair — not only was Pluralsight able to raise what (at the time) amounted to the largest venture-financed round in Utah, they did so without giving up any control whatsoever. That’s basically having your cake and eating it too. Money problems? Solved. Expanded profile? Solved. Networking access? Solved.
“The funny thing is we didn’t take the money until we actually didn’t need it anymore,” Skonnard said. “The founders are still in complete control of the company, we’re still the majority stakeholders, and so we were able to preserve everything that we cared about but we also got the networking access — the access to Silicon Valley — and the access to Utah that we really cared about.”
Remember when I talked about the importance of culture at Pluralsight? If there’s one thing you should take away from this article, it’s that. Companies that refuse to sacrifice their vision, no matter the cost, just aren’t that common. Starting in 2004, the founders of Pluralsight embarked on a journey with a specific vision in mind, a vision that started with a $5,000 dollar buy-in and eventually blossomed into a $135 million seed round. Goal achieved.
“For us it was all about the strategic networking and the vision without any operational involvement,” Skonnard said. “It’s not that we don’t want these guys to help, we just don’t want them to have any control over future, vision, strategy or culture. Because those things are just really, really important to us.”