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 iPhone Battery Percentage Is Back Where It Should Be In iOS 16 Beta 5
The iPhone battery percentage icon in the status bar has returned with the new release of iOS 16 beta 5. All iPhones leading up to the X display battery percentage in the status bar, but Apple sacrificed the convenience of the icon in favor of the then-groundbreaking notch design, which left little room for status bar data. Now, it looks like the company has figured out a way to do both.
On the models prior to the iPhone X, the battery percentage was displayed next to the battery icon. With the new design, the percentage is housed inside the battery icon, leaving space for other status bar data like Wi-Fi and cell signal information. Users no longer have to go through the hassle of opening the Control Center to check their battery level. When an iPhone running the latest iOS 16 beta is in Low Power Mode, the battery icon changes to yellow while still displaying the percentage. When charging, the battery icon turns green and shows a small charging icon next to the percentage.
The new indicator is available for the iPhone 12 and iPhone 13 models, excluding the iPhone 12 and iPhone 13 mini, as well as on the iPhone X and the iPhone XS models. If you have an eligible model and you are already running iOS 16 beta, first update to beta 5, then go into Settings, Battery, and then Battery Percentage to enable the feature. According to CNBC, Apple hasn’t said whether the new feature will make it to the final cut of iOS 16, but our fingers are crossed hoping it does.
Can Your iPad Get A Virus From Safari? Here’s What We Know
As with any other source of access to the internet, it’s possible to get viruses depending on which websites you visit and what you do on them. There are many websites out there with less than good intentions, and from these, there is a potential for harm. Apple isn’t wrong about the extent of its security measures, though, when it comes to its devices. The iPhone, like the iPad, does have a layer of security already built in, with iOS keeping each app separated from the others. This makes it harder for viruses to infect the device and spread (via Apple.)
However, you do still need to be careful about what you do when you’re using the internet on your iPad. Although viruses are unlikely to happen, malware (or malicious software) is still possible. If you visit suspicious sites promising things too good to be true, don’t appear legitimate, and/or that prompt you to download files to your iPad, you’ll want to be very wary of the site and refrain from completing any download. If you have jailbroken your iPad, you’ll want to be even more careful, as this opens it up to security issues. In general, if a site is asking you to give up sensitive information such as bank information or your credit card, you’ll want to be extra careful. Only buy things from sources you trust.
DJI Avata Leak Teases A Drone You Can Fly Indoors
Leaks suggest that the Avata will rely on three-inch propellors with a ducted design, while the mounted camera’s movements will be limited to a single axis of rotation. Alleged images of the package also appear to confirm the DJI Avata branding. The leak also mentions the ability to shoot stabilized videos at 4K resolution, a built-in propellor guard, low-latency transmission for high-resolution visuals, and a palm-sized build.
The box of Avata!
It will be released shortly. pic.twitter.com/D4frzJCOHR
— OsitaLV (@OsitaLV) August 7, 2022
If the leaked retail box imagery is to believed, the next DJI offering will come bundled with accessories such as the Goggle 2, the new Motion Controller, flight battery, headband, spare propellors, USB-C cables, lanyard, screen protector, an eyeglasses frame, and a dual-band antenna to name a few. However, it must be noted that wearing the Goggles 2 will put the small drone out of the line of sight, which means you will need a spotter. It might also be a legal headache in some regions with strict drone regulations.
— Attacco dei Giganti (@AttaccoG) August 6, 2022
For folks only intending to use it for indoor video capture (or, perhaps, to participate in drone racing), the restrictions might be a tad easier. Unfortunately, DJI hasn’t shared any official details about the Avata FPV drone’s release. However, given the recent FCC appearance of the DJI Avata alongside the Goggles 2, it is quite evident that an official debut is likely just around the corner.
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