047.  Pausing the Treadmill

VC Minute
What happens when you miss your milestones? Can you pause the VC Treadmill? Of course. Here's how one company did it.

VC Minute – quick advice to help startup founders fundraise better.

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If the VC Treadmill is the process of raising money, to grow your business, to hit milestones for the next round of growth, then what happens when you miss your milestones? 

You have three choices. One, raise the dreaded bridge round. I mean, excuse me, an insider round. Two, go out of business, including various forms of acquisition. Or three, adjust your business to focus on breakeven or profitability. I think the cool kids are calling this “default alive.” 

Even in my limited experience, I’ve seen all of the above happened to great founders. Let’s talk about the third case adjusting for breakeven. Just like being on a treadmill at the gym, you can slow down the VC Treadmill at any time. 

You’re in control. 

I want to tell you about one portfolio company that took a hard look at their business when COVID shut the world down in early 2020. They pulled way back on burn rate, they took salary cuts, stopped new hires, cut extraneous lines of business, and dug in deep to focus on their core business. As the year progressed, many startups saw breakout successes, preemptive rounds, and there was abundant capital. 

But this team kept their heads down and focused. By the end of the year through their grit, determination and intense focus on unit economics, they turn the year around. They grew revenues got back to full salaries, plus expansion hires,  all supported by a stronger business model with lower churn. They then topped it off by raising a Series A in late 2021, on their terms.  We couldn’t be more proud of them. 

When you take growth capital, you have a responsibility to your investors to do everything you can to hit those milestones. But if you miss this, you don’t have to burn it to the ground. You can pull back, slow down and refocus to emerge with a stronger business. 

Whether you’ve already raised venture capital or are considering it, remember, you’re still in control of the business. That is. As long as you have control of the board. But that’s a topic for another time.

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