Case Study: Popl Shows Positive Cash Flow And Growth Go Hand In Hand
A wild Case Study appears!
Author’s Note: Welcome back to the Case Study series! A brief refresher for all followers: Case Studies are deep dives into startups at various stages of growth. I’ll periodically catch up with successful founders I’ve known over the years from Forbes and earlier in F2F’s history.
Right now, this is the first Case Study in their revamped form. It’s less structured and more freeform. I’ll ask a maximum of three questions about topics experienced founders face or care about, and give them space to respond in a conversational tone. The new form behind these Case Studies are meant to be easier to digeset, and more relevant to my audience as they endure in building their startup.
Enjoy! - Soda
Introduction:
Popl is the leading digital business card platform for teams and individuals. To date, the company has only raised $2.5M and has already surpassed $1M+ in monthly recurring revenue (MRR) while facilitating over 100,000,000 professional interactions. I sat down with Popl CEO Jason Alvarez-Cohen to discuss how positive cash flow and growth can go hand in hand.
Case Study: Popl
Frederick Daso: How do you define hiring based on revenue versus valuation? Which one have you chosen for Popl's needs and why?
Jason Alvarez-Cohen: Hiring based on revenue versus valuation are two different approaches companies can take when deciding to expand their workforce:
Hiring based on revenue:
This approach uses the company's income to fund new hires. Companies that follow this method typically wait until they have a steady revenue stream before adding new employees. This is a more conservative and sustainable approach to growth.Hiring based on valuation:
This method relies on the company's perceived value, often inflated by venture capital (VC) investments or funding rounds. Companies using this approach might hire aggressively based on projected growth or the amount of money raised rather than actual income.
For Popl's needs, we chose to hire based on revenue. Here's why:
Early cash flow positivity: We discovered we were cash flow positive early in the company's development. This means the business generated more cash than it was spending, allowing for sustainable growth without relying on external funding.
Sustainable growth: By hiring based on revenue, we ensure that each new hire is supported by actual income rather than speculative valuations or VC money. This approach reduces the risk of over-expansion and potential layoffs if funding dries up or valuations drop.
Strategic hiring: As our revenue grows, we carefully consider the most pressing hiring needs and address them individually. This allows for a more focused and efficient team expansion, ensuring that each new hire adds significant value to the company.
Financial forecasting: We consider each new hire's additional payroll costs and carefully forecast these expenses into their financial projections. This helps maintain a healthy balance between growth and financial stability.
Maintaining equity: We have kept more of the company's equity by hiring based on revenue rather than raising capital. This is advantageous for founders and early employees, as it prevents dilution of their ownership stakes.
Aggressive yet sustainable growth: Despite not relying on VC funding, we have been able to hire somewhat aggressively. This suggests that their revenue growth has been strong enough to support expansion without compromising financial stability.
Independence from external pressures: By not relying on VC money for hiring, we can make decisions based on what's best for the company's long-term success rather than trying to meet investors' often short-term expectations.
This approach aligns with the bootstrapping mentality often seen in successful startups. It promotes financial discipline, encourages efficient resource use, and allows the company to grow at a pace that matches its market success.
It's worth noting that while this strategy has worked well for Popl, the best hiring approach can vary depending on the industry, market conditions, and specific circumstances of each company. Some businesses may benefit from rapid scaling funded by external investment, particularly in winner-take-all markets or when speed to market is crucial.
Daso: What metrics should founders consider when hiring an additional person?
Alvarez-Cohen: When considering hiring an additional person, we take into account several key metrics and factors:
Revenue impact: Assess whether the new hire will contribute directly to revenue generation (e.g., sales roles like SDRs, AEs, etc) or indirectly support revenue growth (e.g., engineering, executives, or operations roles).
Automation potential: Before hiring, evaluate if the task can be automated or solved with software such as Zapier, Braze, etc. Staying scrappy and efficient is crucial.
Operational necessity (this is a big one): Ensure the hire addresses a critical need rather than adding unnecessary layers of management. Screen for high-performing individuals willing to take on hands-on work. I have many friends with bad stories about hiring too much management/delegators too early.
Financial feasibility: Forecast the impact of the additional payroll on current revenue. Ensure the hire doesn't jeopardize the company's financial stability.
Ramp-up time: Consider how long it will take for the new hire to become fully productive and contribute meaningfully to the company's goals. This ramp-up period should be part of the forecast.
By carefully evaluating these metrics, founders can make more informed hiring decisions that align with their company's growth strategy and financial health.
Daso: When is the best time to "codify" your company's values?
Alvarez-Cohen: In our journey at Popl, we didn't rush to define these values right from the start. When a company is just beginning, it's challenging to pinpoint your true core values as they often emerge and evolve through experience.
For us at Popl, the right moment came when we reached about 30 full-time W2 employees. At this point, establishing our core values formally felt natural and necessary. This timing gave us enough shared experiences and growth to understand what principles were driving our success and culture truly.
Codifying our core values has provided our team with a clear compass for decision-making. These values serve as a lens through which our employees can approach problems and questions. When faced with tough decisions, our team can refer back to these values for guidance, ensuring that our actions always align with our company's fundamental beliefs. About 30 employees were the time that this seemed necessary as the culture began to become slightly harder to maintain. Company/core values help with keeping things aligned.
Moreover, these core values help keep our employees focused on goals that truly move the company forward. They create a shared language and understanding of what's important at Popl, fostering unity and purpose across all departments.
At Popl, we've distilled our core values into five key principles:
Customers come first
Launch, iterate, repeat
Feedback is a gift
#DoItNow
One team, one dream
These values reflect who we are and what we aspire to be as a company. They guide our customer interactions, approach to product development, internal communication, sense of urgency, and team spirit.