So you have just closed on your $1m seed round. You’re excited and ready to get to work. The first thing you do is contact TechCrunch and PandoDaily to get some PR, hire a few engineers, a marketing person and begin paying yourself. Your burn moves from $15k per month to $75k per month overnight. You are driving traffic to your site, building product and showing early signs of execution. You were invited to sit on a panel; you’re mentoring some young teams; all in all, you’re feeling pretty good about yourself.
But, you can’t help beginning to think that the clock has started ticking – 12months and counting to get to that elusive Series A.
So, you begin to scour the blogs, absorb everything that other successful start-ups have done and decide that with 12 months of cash on hand, its time to double down on the business model that you got funded and crack the formula for a scalable user base and show “Fab-esque” growth. You throw out the idea of the lean model and say “fuck it” time to take control of my own destiny!
In the age of Lean Lean Lean, it never ceases to amaze me how many companies at the seed stage fall into the trap. They mistake maniacal focus on growth for “fire in the belly”.
And, at month 10 or 11, the entrepreneur begins to complain to his investor base that despite all of these great metrics of growth, the company is falling victim to the Series A crunch.
When, in reality, the Series A crunch was a proxy for focusing on the wrong things at the seed stage…
In our portfolio, we believe that exceptional entrepreneurs tend to have very similar characteristics regardless of their customer/market/product differences. We believe that they have a genetic make-up different then regular entrepreneurs. I like to call the super entrepreneur gene that distinguishes the winners from the losers, “The Random Walk Gene”.
This gene is displayed by founders who, at the seed stage, realize that they are embarking on a 10000 mile foot race. They realize that momentum early on does not dictate success. They recognize that a random walk down a lot of different avenues will ultimately help them in the long run. They realize that learning from mistakes at the seed stage is usually more important then continuing to pile on to the early successes that they have had (think about this for a second, imagine if you knew all of the customer acquisition strategies that don’t work and why… as a nascent business, that information is incredibly powerful – maybe more powerful then knowing one strategy that does work since you don’t have enough $$ to milk that strategy to get you to scale).
The other unique characteristic of this gene is that these entrepreneurs are always ok sacrificing short-term gains in exchange for long term goals – and they NEVER lose sight of this. If that means that they sacrifice revenue opportunities to continue to build on a more lucrative business model, then they build for the long-term. If it means giving up a little more equity to bring on the right partners (employees, advisors and investors) then they swallow the dilution. These entrepreneurs don’t calculate their personal net worth based on the last round of their valuation – they calculate the value that their customers get everyday from using their products.
As a result, super-gene entrepreneurs become pillars of stability in their company and in their community’s – they stay calm, consistent and emotionally stable.
I can name these entrepreneurs and examples off how the gene has displayed itself off the top of my head. Not because I talk with these guys everyday, or brag about their success, but because I truly admire their ability to prioritize what is important. Amazingly, and without fail, each of these companies ALWAYS figures out a way to pull off a fundraise, or convince another recruit to come on board or get multiple acquisition offers at every stage of their development.
Building a great business takes a long time. Slow and steady at the seed stage may mean that you sacrifice the sexiness of running a hyper-growth opportunity, but in exchange, you will have a much more stable business on your hands. Oh yeah, and the chances that you will stumble on the sexy business model of the moment is like 1 in a 100,000…so at the least, play the game where the odds are more in your favor.