Startups Should Prioritize Growth Over Profit

Reminder for VC backed startups regarding revenue, profitability and growth:

Typically, the goal is not to build a profitable business. The goal is to build something people/companies love whereby you understand the cost of growth (unit economics, revenue short fall etc) - and then fueling that growth as fast as you can with venture capital.

Over time, economies of scale, network effects and new revenue streams should make up the difference and blast you through to profitability at scale - or someone buys your big, growing and unique user-base for lots of $$

Originally Posted On Facebook

It’s Not What You Say, It’s How You Say It

From an investor point of view, the way you word/frame the things you say can be more important than what you’re saying. Because by framing it well you’re proving that you understand how to navigate it well.

Originally Posted On Facebook

4 Things You Need To Prove To Raise Capital & Have A Good Exit

If you're building & running a self-serve consumer app, you really only need to prove 4 things to raise capital and have a good exit

1. You can spend $x on acquiring a user and get $y in return. Where y is the Customer Life Time Value (LTV). It’s ok if Y is initially less than X (this is investing/subsidizing growth - see point 3).

2. The market your addressing is large enough such that your total revenue can become meaningfully large.

3. You have a clear and believable strategy to reduce the cost of X and increase the return of Y (This is essential if X is still greater than Y)

4. You have an IPO in your future and/or (more likely) you have a number of potential acquirers lined up - ideally you've started building relationships with them already.

Originally Posted On Facebook

Why Do You Raise Capital?

You raise capital to trade money for speed & effective execution.

Originally Posted On Facebook

You Need To Be Talking VC Partners

If you're meeting with VCs, make sure you're meeting partners, or make sure the associates you're meeting with are ultimately introducing you to Partners. If that's not happening, you're probably not getting anywhere.

Originally Posted On Facebook

Be Aware Of Your Personal Narratives

Be careful of your personal narratives and biases. They might be getting in your way and sabotaging your stated goals. For example:

• Fundraising is not 'grovelling for money' - it's sharing your ideas and looking for partners who want to join you on the journey.

• Monitor for any internal struggle between wanting to build a  'lifestyle business' and 'high-growth startup'. Both are fine, but they are different things and you should pick one intentionally. 

Originally Posted On Facebook

Capital NOT Revenue

High growth startups are about raising capital & burning it. Not making revenue & earning it.

Originally Posted On Facebook

Ask For The Right Amount Of Funding

Investors have limited bandwidth and a chunk of capital they need to put to work. 

Don’t try to minimize your funding ask thinking it will be easier to get a “Yes”. You need to be asking for the right amount of money to put you on a trajectory to win your category and get a 100x return on their bet. 

Anything less than that is uninteresting and comes across as naive.

Originally Posted On Facebook