121. Eternal Optimists & Achievable Valuations

VC Minute
Founders are eternal optimists. It's a benefit to your company for you to think that the company is always going to prevail in the end. At the same time, founders need to be grounded when it comes to economics.

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

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Rachel McCrickard

I have found, and I don’t know how many other founders this do, but I get my hopes up a lot. Oftentimes, founders are eternal optimists. Every single pitch that I made, I would leave it and tell my husband that it went fantastic. They’re definitely going to invest in us. They loved me!  And then they would pass, and I’d be like, “Oh man, you know, what did I get wrong there?  

I do think it’s helpful to the company that I always think Motivo’s going to win. I think that mindset is very helpful to the company. But it does give you quite whiplash when, all of a sudden, it doesn’t go your way and you think, “Oh man, what went wrong here? 

The truth is that most investors pass, and sometimes it’s in your control and sometimes it’s not. 

One good piece of advice that I remember hearing from a very early investor of Motivo, Michael Tone, is that “he said, learn to love the fast no; the slow maybe is the worst possible thing.” A fast no, for me, is like, “Thank you so much. See you someday, and I wish you well.  

I do want to emphasize the importance of strong unit economics in the current climate. I think that historically, it has been a raise, grow, grow, grow, grow, like keep going. 

For us, we’ve been trying to be very intentional. We got lucky in the sense that we didn’t raise at the top of the market; we raised at a very achievable valuation. 

Sometimes people are like, “Oh my God, that was so smart of you. And I’m like, “Yeah, that’s what it was. It was super smart. Like I said, it was totally intentional to get a lower valuation. But in this market, it’s absolutely to our benefit.

We have a very achievable valuation. We don’t have to lay off employees. We are limiting our growth to only the headcount that we absolutely need to hit our sales targets. We have a 22-month runway, more than enough to make it through this current climate. 

I think as founders, you have to think about what the path to profitability is for us. Is there a path to profitability? In this climate, it’s a lot more important than I think it’s ever been before.  The founders and companies that are going to win in this climate are going to be ones who are mindful of their burn and who are building solutions that create more automation and less manual processes so they can cut down on their headcount.

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