2022 was certainly a watershed year for both investors as well as founders.
The days of ...
How fast can you scale up to meet the bigger goals?
are over!
Until 2021, VC money was in abundance, and the mantra was "growth at all costs!"
The recipe for all-out growth was simple:
Raise capital every 12-18 months
Invest a majority of it in Go-to-Market to ...
Grow 2-3X every year for the next 5 years
Achieve high valuations for the existing investors to exit with remarkable returns.
The founders kept spending enormous loads of cash (raised via external funding) to grow 2-3X every year, raise a bigger round at a higher valuation whenever the burn was nearing the end, and the cycle kept repeating.
< Image Source: Neotribe Ventures
Everybody (investors, founders, employees, vendors) was happy, while the press went ga ga over announcing their subsequent funding rounds, or scaled-up metrics.
Those, who talked about/advised sustainability were denounced as pessimists or stuck with the old corporate mindset.
The scenario was indeed scary ...
Vanity metrics (valuation and round sizes) with no clear pathway to profits.
Ballooning negative cash flow every month is like a ticking time bomb.
Then, came 2022 ...
Tech stocks led a rout in the world’s biggest stock markets, trillions of dollars were lost, and thousands were laid off (the saga that still continues to date.)
"Growth at all costs" was halted:
When capital dried up, the startups had no positive cash flow to make ends meet.
Hoards of layoffs happened in a bid to reduce money burn.
When fictitious paper gains crystallized into write-offs, investors started being more careful.
And bleeding continued with scores of startups shutting down than ever before ...
Raised funds doesn't guarantee success, as more startups have shut down in 2023 than ever before. The immediate cause of death in a startup is always running out of money.
The way to make a startup recession-proof is to do exactly what you should do anyway:
Run it as cheaply as possible - Paul Graham, Y Combinator
So the cheaper your company is to operate, the harder it is to kill.
For years I've been telling founders that the surest route to success is to be the cockroaches of the corporate world. The mantra is now back to ...
Sustainable Profitable Growth
What does it mean to have Sustainable Profitable Growth?
Your startup must attain each of the below:
Consistent, Growing Demand - Indication of Product/Market Fit (PMF)
Scalable and Profitable Business Model with Good Margins.
High NPS and Retention (We can help, checkout how?)
Resources:
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