A 26 year-old British founder grew his company to $3 million recurring revenue without any venture funding. Here's why he shunned VC.
- British entrepreneur Jack Underwood founded Circuit in 2016 but has opted against traditional VC funding to-date to grow his business.
- Circuit is an app for delivery drivers that lets them plan out their delivery routes in a more efficient way.
- The company saw $3 million annual recurring revenue (ARR) in 2019, according to Underwood, but has only raised cash sparingly from angel investors and incubator Techstars.
- Underwood claims that it's important to retain control of his startup and its objectives, demonstrating that VC investment may not be the be all and end all for tech companies.
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Investment in the form of venture capital is the lifeblood of many startups, but one British startup says it isn't the only path to growth.
Circuit, an app which helps delivery drivers map out their routes more efficiently, claims to have recorded $3 million annual recurring revenue (ARR) in 2019 despite not having any traditional VC investment. Its 26-year-old founder, Jack Underwood, says the company is growing as fast as some venture-backed businesses by learning to be capital efficient.
The company works on a subscription model, offering individuals a free trial before charging them from $20 per month. ARR is one metric commonly used by software subscription startups to indicate growth and that they can win and retain paying customers.
"We've been growing at a staggering pace with more than a million deliveries a week last year," Underwood told Business Insider in an interview. "The issue with raising money from VCs is that you dilute control of your business and you know from that moment there is a death date for your company."
Research from UK-based startup SeedLegals estimates that British founders give away between 10-20% of their business in equity at seed stage. Underwood wanted to take a different route.
"I thought, 'If we can grow as aggressively as a venture-backed company without venture funding' then we should do that. It's good to go against the grain," he added. The dilemma over equity has been pertinent for Circuit. The startup was approached by startup incubator Techstars for investment and accepted the standard $20,000 investment and expertise in exchange for 6% of the business. But Underwood balked at losing another 4% for $100,000 more.
"There's no pressure for us to take on more money. We are using our working capital effectively and managing our ad spend carefully," Underwood said. "The key is being capital efficient."
To that end, Circuit's six full-time employees work remotely with the company's cofounder based in Belgium while Underwood resides in the UK with other staff as far flung as Australia and Brazil. Unsurprisingly, the company's route optimization app peaked in demand around Christmas and ended 2019 with three times the revenue of the previous year.
Delivery companies often pay a subscription fee to Circuit due to a lack of better in-house alternative for their drivers with some 15,000 drivers using the platform the $20 starting price currently. Underwood posted his story on Twitter at the end of 2019 and said that he received a lot of positive responses from investors about his stance on funding. Still, he added, he expects to turn to fundraising at some point in the future.