Dear Startups: Here’s How to Stay Alive
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Dear Startups: Here’s How to Stay Alive
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Re: Dear Startups: Here’s How to Stay Alive
#2Good read. Sounds like good advice in general, regardless of how hard it is to obtain capital.
Re: Dear Startups: Here’s How to Stay Alive
#3The cynical side of me wonders if all this is "helpful advice" from VCs is just designed to bring valuations down to earth.
Re: Dear Startups: Here’s How to Stay Alive
#4You know what kind of companies generally survive? Companies that make more money than they spend. I know, duh, right? If you make more than you spend, you get to stay alive for a long time. If you don’t, you have to get money from someone else to keep going. And, as I just said, that’s going to be way harder now. I’m embarrassed writing this because it is so flipping simple, yet it is amazing to me how many entrepreneurs are still talking about their plans to the next round. What if there is no next round? Don’t you still want to survive?
Yes, some companies are ‘moon shots’ (DFJ has a fair number of those in our portfolio) where this is simply not possible. But for the vast majority of startups, this should be possible.
What is the point of calling them start ups anymore. Remove the high risk/high reward aspect and new companies are simply small businesses that receive small business loans from banks. A lot of the "wow" factor of the startup ecosystem was the mind boggling user growth/high valuation/massive losses phenomenon that a few companies weathered through to IPO and monetization.
I think I saw someone advocating for better terminology on HN recently. I vote to call any close-to-profitable Leave the unicorn/VC/startup lingo in the past, or use it to describe actual risk profiles, and things will be a lot less confusing.
Re: Dear Startups: Here’s How to Stay Alive
#5You know what kind of companies generally survive? Companies that make more money than they spend. I know, duh, right? If you make more than you spend, you get to stay alive for a long time. If you don’t, you have to get money from someone else to keep going. And, as I just said, that’s going to be way harder now. I’m embarrassed writing this because it is so flipping simple, yet it is amazing to me how many entrepre…
i would love if a term for this kind of small businesses would establish
given that more and more startups go niche + traction first and often are ok w/ staying there there is also the need for a different finance model imo
Re: Dear Startups: Here’s How to Stay Alive
#6Good read. Sounds like good advice in general, regardless of how hard it is to obtain capital.
Totally agree. In a world that runs on money getting to profitability should not just be something you strive to get to but rather something you have. Until you do you shouldn't let anything else take away from your focus.
Re: Dear Startups: Here’s How to Stay Alive
#7The cynical side of me wonders if all this is "helpful advice" from VCs is just designed to bring valuations down to earth.
I am a cynic about VCs "Talking their books" but this is a little different:
- The stock market is off 20%.
- Very few IPOs.
- Many hot IPOs are under the offering price.
- Most of the public market investors that have entered late in the game (Fidelity, etc) are marking down their positions, and holding off on new investments.
Every solid company should have a "What would we need to do to get cashflow positive?" scenario. It may damage longterm valuation (cutting growth does that) but at least it gives the existing investors an option: "We can enter survival mode and do X, or you can fund us with Y, and we can do Z"
Re: Dear Startups: Here’s How to Stay Alive
#8I think the startup world has become somewhat of a fork of how real companies should be built. Over the last few years companies have been investing into "scaling" and getting traction with no real revenue to substantiate any of the growth. That to me is backwards, and why those startups are fearing for their lives now.
Companies should be built with revenue (and profit) in mind, and in most cases those are the ones that thrive and succeed.
Re: Dear Startups: Here’s How to Stay Alive
#9Good read. Sounds like good advice in general, regardless of how hard it is to obtain capital.
Funny - it sounds and awful lot like the absolutely uninspired, flat-out obvious to me, that, summed up in one word, reads "austerity".
However, following this piece advice sure makes it cheaper for other parties to acquire parts of those [companies] that do :)
Re: Dear Startups: Here’s How to Stay Alive
#10You know what kind of companies generally survive? Companies that make more money than they spend. I know, duh, right? If you make more than you spend, you get to stay alive for a long time. If you don’t, you have to get money from someone else to keep going. And, as I just said, that’s going to be way harder now. I’m embarrassed writing this because it is so flipping simple, yet it is amazing to me how many entrepre…
I started writing this then got distracted. Everyone not only needs to collectively define what a "startup" is, but more importantly, don't blow sunshine up my ass by telling me to act like an SMB. Because I don't run into many investors who get excited about my company's reasonable P&L. There's a significant difference between a company running like a small biz and a hyper-growth-at-all-costs one. It would be quite helpful to know which investors are interested in each, all the BS put to the side.
edit: I do realize (and hope) that the current financial environment helps to bring everyone back down to earth a bit.