We understand that today’s startups are engaged in a game of musical chairs, and we design our strategy to retain a chair for our entrepreneurs to dominate new markets. The unique formula for a winning company rests on four pillars: unit profitability, restrained burn rates, capital stability, and contingency planning.
1. Unit Profitability
Being able to achieve product market fit and positive return on sales, without massive amounts of capital, is highly predictive of success and the best inoculation against capital “bubbles”.
2. Restrained Burn Rates
This isn’t to say that companies should be undercapitalized, but scarcity and respect for capital do drive innovative thinking and focus. Both are keys to success at any point in the cycle.
3. Capital Stability
We believe the best foundation is a syndicate of two institutional investors possessing the dry powder and conviction to support initial growth and the credibility to attract high-quality growth investors when it’s time to pour on the gas.
4. Contingency Planning
Even in buoyant times, a precautionary assessment of the unexpected remains valuable. For example, if you’re expanding nationally while still trying to prove product market fit or still seeking solid unit economics. In this instance, your burn is likely very high, making your reliance on attracting additional capital more absolute, and potentially more difficult.
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While unit economics, lean startup philosophies, capital stability and precautions are unsexy, it is critical for startups to ensure that they are supported by all four pillars when the inevitable cycles of the market turn. After all, to win at musical chairs, you need a firm seat.
