1/ From vantage point of being able to see hundreds of companies, good & bad I have some advice for founders - Get to know and love "gross margin." Revenue doesn't pay your bills, GM does
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2/ Founders obsess with revenue as a vanity metric. Some even grow "bad" revenue just to show growth. As a founder I'd take healthier revenue (higher GM, faster paybacks) any day of the week
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3/ Stop obsessing about LTV/CAC ratios. Payback periods on customer acquisition way more important to you in the near-term. Get paybacks wrong and you're out of business
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4/ LTV/CAC is to impress investors. Ultimately it matters a great deal. But in short-term you know that LTV is based on optimistic future assumptions and payback periods on acquisition are based on flying into a brick wall if you get them wrong
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5/ Unless you're scaling rapidly don't hire staff too quickly. More people aren't the answer if your core business isn't already productive. Hire when it feels like you're bursting at the seems or missing a critical skill on existing team or have figured out how to scale growth
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6/ Raising capital at very high prices helps avoid short-term dilution. But if you raise at too high a price you make it harder to raise next round. Be sure you can grow into your valuation by next fund-raising or your last raise could become existential or extremely dilutive
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7/ If you know an employee is a negative energy in the office don't delay parting ways. Negative employees affect others like a disease and you can't ever turn them around. There's never a perfect time - except now.
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8/ Don't spend undue time advising other people's startups until your business is successful, scaling & stable. Founder focus is the single most important resource that needs to be spent wisely
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9/ Don't spend undue time at conferences. Networking & relationships are important so some events are fine but if you're addicted to being out of the office that should tell you something. Or at least your employees will tell you what it means
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10/ Communicate to board early & often. Getting through hard times requires investors willing to spend time, to spend internal political capital & to be willing to go to bat for you in tough times. Strong relationships & trust based on transparency helps a great deal
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11/ Venture debt has its places (timing of AP vs. AR, inventory purchases, etc) but should be used very sparingly as a replacement for venture capital except at later stages of your business. Usually a terrible idea as runway extension. Debt comes home to roost
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12/ As you scale you should think about redundancy in every key role in the company - including CEO. Things happen, people tire, sometimes tragedies. You wouldn't build a single point of failure in your code - shouldn't in your company. Tech, product, sales - all need redundancy
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Scaling negative margin...
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that old one ...
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Yes it is so old, you would think folks would know better
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It’s not what you make ....it’s what you keep
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If anyone needs an example of what happens when you attempt to scale bad revenue and neglect margins, see: Tintri
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It’s not counter in days :)
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