Four ways to bridge the widening valley of death for startups – TechCrunch
Many founders believe in the myth that the first steps of starting a business are the hardest: Attracting the first investment, the first hires, proving the technology, launching the first product and landing the first customer. Although those critical first steps are difficult, they are certainly not the most difficult on the arduous path of building an iconic company. As early and late-stage funding becomes more abundant, founders and their early VC backers need to get smarter about how to position their companies for a looming valley of death in-between. As we’ll learn below, it’s only going to get much, much harder before it gets easier.
There will be an abundance of capital at the two ends of the startup spectrum. At one end, hundreds of seed and micro VCs, each armed with dozens of $250,000-$1 million checks to write every year, are on the prowl for visionary founders with pedigrees and resumes. At the other end, behemoths like SoftBank, sovereigns, as well “early-stage” firms raising larger funds are seeking breakout companies ready for checks that are in the mid-tens to hundreds of millions. There will be a dearth of capital to grow companies from a kernel of a business, to becoming the clear market-defining leader. In fact, we’re already seeing deal volume decreasing significantly as dollars increase, likely evidence of larger checks going into fewer companies.
Founders should no longer assume that their all-star seed and Series A syndicates will guarantee a successful follow-on financing. Progress on recruiting and product development, though necessary, are no longer sufficient for B-rounds and beyond. Founders should be mindful that investors that specialize in leading $20-50 million rounds will have a plethora of well-funded, well-mentored, well-staffed startups with slick presentations, big visions and some early market traction from which to choose.
Today, there is far more capital chasing fewer quality companies. Fewer breakout companies and fear of missing out is making it easy to raise growth rounds with revenue growth, which may not be scalable or even reflective of an attractive business. This is creating false realities and prompting founders to raise big rounds at high prices — which is fine when there is an over-abundance of capital, but can cripple them when capital later becomes scarce. For example, not long ago, cleantech companies, armed with very preliminary sales, raised massive financings from VCs eager to back winners toward scaling into what they characterized as infinite demand. The reality is that the capital required to meet target economics was far greater and demand far smaller. As the private markets turned, access to cash became difficult and most faltered or were acquired for pennies on the dollar.
There is a likely future where capital grows scarce, and investors take a harder look at the underpinnings of revenue, growth and (dis)economies of scale.
What should startup leadership teams emphasize in an inevitable future where the $30 million rounds will be orders of magnitude harder than their $5 million rounds?
A business model representative of the big vision
Leadership teams put lots of emphasis on revenue. Unfortunately, revenue that’s not representative of the big vision is probably worse than no revenue at all. Companies are initially seeded with the expectation that the founding team can build and sell something. What needs to be proven is the hypothesis that the company can a) build a special product that b) is inexpensive to convince customers to pay for, and c) that those customers represent a massive market. It should be proven that it is unattractive for customers to switch to the inevitable copycats. It should be clear that over time, customers will pay more for additional features, and the cost of acquiring new customers will go down. Simply selling a product to customers that don’t represent that model is worse than not selling anything at all.
Recruiting talent that’s done it
Early founding teams are cognitively diverse individuals that can convince early investors that they can overcome the incredible odds of building a company that until now, shouldn’t have existed. They build a unique product, leveraging unique tools satisfying an unmet need. The early teams need to demonstrate the big vision, and that they can recruit the people that can make that vision a reality. Unfortunately, more founders struggle when it comes to recruiting people that have real experience reducing a technology to practice, executing on a product that customers want and charting the path to expand their market with improving unit economics. There are always exceptions of people that do the above for the first time at startups; however, most of today’s iconic startups knew what kind of talent they needed to execute and succeeded in bringing them on board. Who’s on your team?
Present metrics that matter
The attractive SaaS valuation multiples behoove all founders to apply its metrics to their businesses even if they aren’t really SaaS businesses. Sophisticated later-stage investors see right past that and dismiss numbers associated with metrics that are not representative. Semiconductors are about winning dedicated sockets in growing markets. Design tools are about winning and upselling seats in an industry that’s going to be hooked on those tools. Develop a clear understanding of how your business will be measured. Don’t inundate your investor with numbers; present a concise hypothesis for your unfair advantage in a growing market with your current traction being evidence to back it.
Find efficiencies by working in massive markets
“Pouring fuel on the fire” is a misleading metaphor that leads some into believing that capital can grow any business. That’s just as true as watering a plant with a fire hose or putting TNT in your Corolla’s gas tank: most business models and markets simply are not native to the much-sought-after venture growth profile. In fact, most later-stage startups that fail after raising large amounts of capital fail for this reason. Most markets are conducive to businesses with DIS-economies of scale, implying dwindling margins with scale, which is why many businesses are small, serving local, fragmented markets that technology alone cannot consolidate. How do your unit economics improve over time? What are the efficiencies generated by economies of scale? Is there a real network effect that drives these economies?
I expect today’s resourceful founders to seek partners, whether it’s employees, advisors or investors, to help them answer these questions. Together, these cognitively diverse teams will work together to accelerate past any metaphoric valley and build the iconic companies taking humanity to its fantastic future.
The BMW XM’s Boldest And Brightest New Options, Ranked
Thank heavens BMW resisted the urge to grab the new XM with eye-searing paint colors. Instead, it has the typical blacks, whites, and grays, but it does have a bright red (Toronto Red Metallic) and a deep blue (Marina Bay Blue metallic) hue at no extra cost. The eccentric madness of options starts with the wheels — the XM’s 23-inch M Light alloys in gold (pictured above), which is a unique touch for a large SUV. Thankfully, you can have the same wheels in a more subdued steel gray option, and the standard 22-inch rollers are not that bad.
The BMW XM gets a standard Merino cowhide upholstery with a black-on-black theme, but the $1,500 Sakhir Orange leather option is worth every penny, standing out even more with a combined black accent. For $1,000 more, however, the Silverstone gray leather with a vintage coffee ceiling and door panels is a refreshing aesthetic. However, BMW’s vintage coffee interior theme looks best with the Deep Lagoon teal leather upholstery (pictured above), which costs the same at $2,500.
BMW wants XM buyers to go crazier with its NightGold Metallic exterior trim, a no-cost styling option that matches well with the gold wheels. The package includes a gold-metallic accent band that runs from ahead of the A-pillars and wraps around the side windows (pictured above), the outer border of the front kidney grilles, and the rear diffuser. Another no-cost option is M Sport Brakes with blue or red calipers, and exclusive M logos.
With base prices starting at $160,00, the all-new BMW XM is a big, bold, powerful SUV that screams money and privilege. It exists in a world littered with Lambos, Aston Martins, Maybachs, Bentleys, and Rolls-Royces, but none feels more forward-looking as the XM.
This Jet-Powered Soviet Airliner Had A Unique (But Dangerous) Design
As any aviation enthusiast will tell you, the name “de Havilland” is synonymous with the history of the jet engine. The British de Havilland Comet was the first of its kind — a jet airliner that would revolutionize air travel and pave the way for other airliners to follow. Its first prototype launched in 1949, according to the Royal Air Force Museum. After two disasters, the result of structrual deficiencies, the Comet 1 was retired.
But the Soviet Union unleashed its own jet airliner: the Tupolev TU-104. The body of a TU-16, another Soviet bomber, was adapted to add more passenger space inside, and the aircraft switched from a military to a commercial capacity.
In authorities’ zeal to put the Soviet stamp on the history of global jet travel, about 10,000 staff members worked on the plane, and its flight debut occurred several weeks earlier than originally intended. This seemed to mean, though, that testing wasn’t as rigorous as it could have been, and the aircraft was plagued by problems as a result.
Apple’s Vision Pro Headset Is Also A 3D Camera
According to Apple, all of the videos and photos captured using the Vision Pro’s 3D camera will offer a more immersive experience compared to content captured with ordinary content. That’s not to say that you can’t experience your existing Photos library with the headset, however, and Apple notes that panoramas can be viewed wrapped around the user — though only if those panoramas were captured with an iPhone, by the sounds of it.
The content appears within large windows placed in the user’s own environment, meaning the videos are watched on a large virtual screen that, in a way, is like a huge living painting positioned in one’s living room or office. These videos can be played alongside other apps available on the Apple Vision Pro, and they include expected controls like the ability to scrub through the videos, pause videos, expand photos to larger sizes, and similar. To no one’s surprise, the camera and headset both play well with other Apple products like FaceTime, as well.
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