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'Shooting for the stars and hitting the moon' - a tempting strategy, but is it right for a scaling start-up on the funding mission?

'Shooting for the stars and hitting the moon' - a tempting strategy, but is it right for a scaling start-up on the funding mission?
July 24, 2023 2:47 PM
Jason Hawthorne
Jason Hawthorne, CCO of BOOM
Accurately Assess Your Company's Value and Potential Audience

It's tempting to aim for ubiquity and assume that everyone will want to use your revolutionary platform. However, it's crucial to remain realistic. Will thousands or millions of people genuinely be interested in what you have to offer? Setting realistic Total Addressable Market (TAM) and Serviceable Addressable Market (SAM) should go beyond a mere pitch deck for investors. It's essential to understand how you'll gain traction and determine the unique value your product or service brings. Failure to grasp these factors may result in wildly inaccurate pricing, putting your entire offering at risk.

Avoid Overvaluing Your Business to Secure Funding

Founders often overestimate the value of their business, fearing excessive equity dilution during funding rounds. However, this approach comes with consequences. If you manage to convince investors to buy in, you'll need to deliver on that perceived value. There are two potential outcomes: either your business takes off as projected, and you can bask in the accuracy of your visionary plans, making future funding rounds easier, or, more likely, you use the capital for scaling and ongoing operations. As the money runs out, you'll need to raise more funds. At this stage, the shares are priced higher, and you must prove to your initial investors that things are progressing well. This cycle could continue, but eventually, you'll face the harsh reality that others don't believe in your inflated value. You'll be left with two choices: retreating, resizing, and trying again, or going through a substantial down round.

The lesson here is to spend your investors' money wisely, treating it as if it were your own. Ensure that the majority of expenses genuinely add value—acquiring more customers, increasing customer loyalty, expanding market share, and fostering growth. Building additional tools and features is not equivalent to proving value; it's important to launch those features, demonstrate their value to customers, and achieve sustainable growth before the funds run dry. If you lack confidence in accomplishing these goals, it's wise not to put all your investors' money into this metaphorical basket.

Focus on Sustainable Growth and Profitability

While rapid growth may seem appealing, it's important for founders to balance growth with profitability and sustainability. Avoid getting caught up in chasing vanity metrics or prioritising user acquisition at the expense of revenue generation. Develop a clear business model and set realistic financial goals. By focusing on sustainable growth, efficient resource allocation, and profitability, founders can ensure the long-term viability of their venture and maintain control over their company's destiny.

Demonstrate a Strong Execution Strategy

Investors not only want to see a compelling business idea but also want confidence in your ability to execute on that idea. Develop a robust execution strategy that outlines your concrete plans, milestones, and key performance indicators (KPIs) for achieving your business objectives. Show investors that you have a clear roadmap for product development, customer acquisition, and revenue generation. Provide evidence of your track record in achieving milestones, and showcase how you plan to leverage investor capital to drive growth. A strong execution strategy reassures investors that their funds will be utilised effectively and increases their trust in your ability to deliver results.

Embrace a Meaningful Mission

While conducting workshops with your team to define your vision and mission is essential, it's crucial that you genuinely believe in it. As an entrepreneur, you'll face numerous trials and stresses while building your startup, and it's during these challenging times that you may question your path. Why not pursue a conventional job, allowing others to shoulder the burden while you contribute value sporadically? However, where's the excitement, the thrill, the fun in that? Your journey as an entrepreneur should be worthwhile and meaningful—this can only be achieved by wholeheartedly believing in your mission. When you truly believe, others will be inspired to join you.