What's 🔥 in Enterprise IT/VC #224
💰 won't get you to product market fit faster, the importance of walking before you run
Ed Sim | Feb 13 |
What's 🔥 in Enterprise IT/VC #224💰 won't get you to product market fit faster, the importance of walking before you run
While the funding market for enterprise startups continues to be on 🔥, one discipline many founders will have to practice is patience and restraint. We all want to run fast but sometimes walking first is more important than running. As Villi Iltchev from Two Sigma points out, many companies are raising well ahead of where they are as a business. Companies that raise well in advance of where they are as a business remind me of that awkward adolescence phase where you’re in an adult’s body but still are a teenager and don’t really have full control of yourself. 🔑 is there are no shortcuts and a boatload of 💰 too early doesn’t help you accelerate your path to product market fit and if you ramp too quickly, it can accelerate your path to burning that cash quickly. So how should founders think about managing that large, preemptive round? First, remember you don’t have to spend all that cash right away. Second, be honest with yourself and your business. Set goals that are realistic and bottoms up vs. top down (i.e., 4x ARR YoY vs. based on developer love or users, etc). Assess whether you have product market fit or not. Why, because if the latter, you can start spending on sales and marketing hires but if not, you can spend your way to lots of problems. I can’t tell you how many times I’ve seen founders do simple enterprise math, if I hire X number of sales reps who take X months to ramp and are X% productive on their quota, I can reach $X of ARR. It’s easy to do that math but math is not product ❤️ or having a true, repeatable sales model. Finally, if taking that preemptive round, make sure that there is 100% alignment with the new investor on where you are as a business and the goals as I’ve seen misalignment in the past where the investors want a company to scale way before it’s ready. Bottom line, be wise and honest and set realistic goals that has your company stretch but also does not demoralize them and cause the team to do unnecessary acts to realize them. As always, 🙏🏼 for reading and please share with your friends and colleagues! Scaling Startups
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