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  • Wade Foster is the CEO and co-founder of Zapier, which makes low-code/no-code automation tools.
  • Zapier is known to be profitable without having raised a significant amount of funding.
  • Foster gave Insider his advice on how cloud startups could weather the economic downturn.

This narrated essay is based on a conversation with Wade Foster, co-founder and CEO of software automation company Zapier. He spoke with Insider about his advice to other cloud startup founders in the current economic downturn. It has been edited for length and clarity.

Zapier hasn’t raised much VC funding since its launch in 2011. We raised a $1.3 million seed round in 2012, and the company has been profitable ever since. All Zapier operations are funded on the backs of customers.

The last public revenue figure we shared, when we announced our secondary cycle at the end of 2020, was $140 million in annual recurring revenue. We raised the ride with Sequoia, and it values ​​us at $5 billion.

I thought a lot about how to build a profitable and sustainable software business. We have always made sure not to overspend based on income. As founders deal with the current economic downturn, here’s my advice for them.

First of all, I think you need to be really honest with yourself about what your business looks like. You basically have two levers you can pay attention to in a time like this: revenue and cost.

Ask questions like: How can I get more customers? Am I charging correctly? Should I charge more for our products and services? How can I be sure that I am getting income?

The second thing is to pay attention to your costs. If you’re spending a lot based on your income, you need to find a way to make sure you can survive. If you hired long before that, you have some really tough decisions to make. And I think we’ve seen that with so many companies over the last few weeks, where they’ve had to make these tough choices and say, ‘You know what, we’ve actually hired way too many people for what the company at its current level the scene can sustain.” So they had to make layoffs.

Also, if you’re relying on venture capital to bridge that gap, I think you need to have an honest discussion with your investors now. Do you have a business that can raise more money? If the answer is no, you need to act almost immediately. You don’t want to wait and find out three or six months from now that the funds you thought were there aren’t there because the cost of capital has changed for you.

Many companies just need to turn to proven business fundamentals. You can spend what you earn and you can’t rely on venture capital to get you through certain periods. So you have to take much more measured approaches to these things.

Many of these companies depended on venture capital to run a prudent business. And it’s like you don’t have a business yet. You’re still figuring this stuff out. So you need to figure out how you can grow through customer revenue.

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