Way back in time when there were no farming machinery and automobiles, there was Arnold, who was a crop and cattle farmer. He just survived through the worst drought imaginable. It was tough going for him. But, then the gods finally answered his prayers and showered with rain.
During the period of drought, Arnold had stored enough fodder to feed his cattle, which kept them in shape. The water for irrigation was managed from a nearby canal. The cattle’s job entailed – ploughing the fields, carrying heavy loads and water, and sowing seeds.
When drought was over and rain had dawned, Arnold started flourishing in farming, with record produce. He fed excessive fodder to his cattle, as an incentive. His cattle gained weight, due to the excessive fodder intake, and they became lazy. This negatively impacted Arnold. He meted out harsh treatments to them, and even took them to the nearby hills to get them out of their slumber. But, all his efforts went in vain, as they slouched even more, making it impossible for him to sustain the steady run of profitability.
He finally arrived at the conclusion that if he had fed the same quantity of fodder to his cattle, like in the drought, then he wouldn’t have had to face this day. So, he sold off his cattle to butchers, and with the money bought a new fleet. This time, he didn’t make the same mistake. He fed them enough fodder that kept them going, while utilizing every possible opportunity of profiting from the flourishing season, before drought stared upon them.
Now, put the above in context with the present day Startup ecosystem. Think about Arnold being the Startup, fodder being the Funding, the flourishing season being the VC Funding Momentum, the cattle being the Operations, and finally, the cattle’s laziness being the Cash Burn.
The bottom line is, spend enough, which would increase sustainability, safeguarding your startup’s operations during the rainy days (‘Drought’ in the case of Arnold). The market, talent, and customers are always going to be there, but it is you, who should be there to service and profit from them.
The race to market-share cannot be won by discounts, and pumping money into nonsensical marketing campaigns. Capturing market-share is a time-consuming affair. It has been only achieved, when models make way for revenues, and not your funding milestones. It’s the unit economics, the CLTV (Customer LifeTime Value) that should be the primary goals. Rest will follow automatically. As a startup entrepreneur myself, I have taken my oath to support my business expansion through internal accruals. Yes, Internal Accruals – funds generated from the business.
For the next few years, coffee shops would be my stand-in offices, cloud would be the go-to infrastructure, and growth hacks through informative insights and social media connect, would be my marketing apparatus. I will launch products and platforms, way before I gain critical mass. I will look forward to building an ecosystem by collaborating with partners for growth. I will plough back 65% of my profits into business expansion (‘Internal Accruals’ as I referred above) and also free up liquidity for my colleagues through stock option plans. I am sure, if I do this right, the media would find me, and I wouldn’t have to find them.