Most funded startup companies are going through brutal “rationalizing and rightsizing” right now. This is a healthy exercise that bootstrappers go through every day.
If you are breakeven and profitable in your business, you ask questions like these about every hire, expense, or investment decision:
- Is this so really important to our core business that we have to do it?
- Is this absolutely the best use of the next $XX investment?
- Do we truly risk our current and future business prospects if we don’t?
- Is this experiment working? Can we kill it yet and try something else?
When you have lots of investors’ cash in the bank that needs to be spent, you stretch the meeting of “really important,” “core business,” experiments, and risk too.
When you used your own money and time to start and live by customer funding (revenue) to grow, you become 10X more clear about what is core, what is critically important, and what risks you really face.
“Future business prospects” for overfunded companies just got redefined in a big way this year.
The next goal for them used to be to get another round of funding or grow 300% a year. Those aren’t happening now.
Those are investor goals, not customer or business improvement goals.
But for bootstrapped or lightly-funded companies, their growth rate is up to them and they don’t need more funding.
Their future is to keep customers and employees happy and to efficiently grow at whatever pace makes sense without screwing things up.
(“Lightly funded” means the founders have raised some practical outside funding, such as angel funding or small funding from patient investors. Founders are still in control of their growth rates, big strategic decisions, and exit expectations.)
For some startups with big funding, this return to reality will be healthy. They will get clear about what is core, what is important, who is critical, and what their real future can be.
They will make survival sexy again.
For other startups with big funding, this return to reality will be their demise. There wasn’t a core business yet with happy customers and a profitable business model. They won’t recover from being reliant on funding drugs and unrealistic dreams.
Startups are experiments and most experiments don’t work.
Meanwhile, most practical tech businesses are chugging along just fine, despite what the stock market says.
In the long run, reality wins every time.
#practicalfounders
