Annual sales: "Low six figures."
When a local angel investor expressed interest in funding the development of their web-based project management software called Planning Pod in April 2011, business partners Jeff Kear and his co-founder Steven Feingertz got excited. They were taking on well-established competitors like Basecamp and could have used the money. But it turned out that the investors, who were going to pony up $20,000, wanted a 20% the company in exchange, plus 20% of annual revenues; the investor would have four additional opportunities to buy 5% of the firm for about $5,000. Their instincts told them to back away. "It would really cripple us," says Kear.
The two entrepreneurs had been investing revenues from their first successful product, My Wedding Workbook, into building the new one. "I would rather bootstrap it and use the revenue we're already bringing in to bump it along," he says. And that's what they did, offering their tech contractors equity instead of paying development fees. "Our developers now have a vested interest in the success of the company and have shown great initiative," says Kear. Plus, the four-employee firm has freed up cash for marketing.
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