The easy way to waste 20million

I’ve had this conversation with too many founders: Series A raised, 20m ($, €, £) in the bank to scale the business. 24 months later, an expensive GTM expansion has delivered disappointing growth, cash out is 6-9 months away, and the business does not look investable.

Best case, significant cost-cutting (=redundancies), maybe some expensive bridge financing for a few months, perhaps a down round and loss of control.

Worst-case, it’s the end of the road, if you’re lucky a fire sale which gives the founders and employees nothing.

Why does this happen?

In working with over 70 start-ups, I have seen this more than once. The biggest reason is investing in GTM scaling before proving a repeatable motion. Rushing to spend the VC funds before you know it will work.

I’ve seen some good recoveries too. They nearly always require the following:

👁️ Quickly spotting the issue – head out of the sand. Only the paranoid survive.

🩸 Halting the bleed – stop hiring, if necessary reduce spend.

📋 Know what works – pay careful attention to where you’re getting traction and where you are losing.

🔬 Keep experimenting – try different things, don’t get bogged down.

🧑‍💻 CRITICALLY – the founder remains deeply involved in the sales process. Deal after deal, pipeline review after pipeline review.

It is the founder who really knows how to sell in the early days. There is no excuse to step back until the revenue engine is clearly effective.

There’s a lot of pressure to spend, but if you don’t know for sure it works, hold on. If you are not sure you’re ready to spend big on GTM, you’re probably not ready.

Let me know if you’d like to discuss. Or feel free to comment here.

On another topic, if you are interested in selling to enterprise, you're also welcome to join me in London with Nina Pepper, Laura Kightlinger and David Meyer on 25 November, https://lnkd.in/e6xse5Ts. With thanks to Jiminny, Pavilion and Nicola Anderson.