The most dangerous thing a company can do is miscalculate where on the spectrum it exists and what it can realistically achieve on its current course. Time and time again companies that believe themselves to be platforms and subsequently raise ‘platform’ money at ‘platform’ valuations, ramp up their burn without solid data to support a potential jump to the next stage of value creation. These companies risk boxing themselves out of the market by throwing off the balance of valuation vs potential outcome, in effect making the risk/return calculation a hard one to justify for future investors.
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This isn’t as big of a problem for investors, because they are diversified amongst a portfolio of companies who are all taking risk. It is more of a prescient issue for entrepreneurs though, because all of their eggs are in one basket and raising money at high values and setting expectations that are unrealistic to achieve is a surefire way to lose control of a company.
For this reason, The best entrepreneurs share many common traits with the best investors. They understand this tradeoff and framework for decision making. They understand that there are no shortcuts or silver bullets to building a valuable company, and they must align their business strategy with their ambitions and achievable potential value for their company in order to build a company of consequence, and throw a win on the board for everyone involved.
Origen: Why Entrepreneurs Should (Occasionally) Think Like VCs – Leaders Fund