Managing Partner of North America operations at Liquidity Capital, providers of unsecured, non-recourse, no dilution growth capital.
Over the past decade, growth has defined success in the technology sector. The World Wide Web was introduced in 1991, the internet as we know it today, which eventually set off winner-take-all marketplaces and massive scale. By the 2000s, growth became the entrepreneurial mantra, and the birth of new tech giants, entirely new industries and sectors, online communities, commerce and speed of content has redefined how we work, live and play.
Many lessons in this new world order of fast-paced disruption have been learned over the past two decades. While no startup is created with an expiration date, few startups give enough attention to developing a business for the long haul. Growth is still a driving force but must be balanced with fundamental sustainability, a balanced ratio of growth to funding models, and, in turn, a balanced cost of funding growth. In summary, early-stage companies need to be more strategic in their approach to fund their businesses, as it is an endurance race and not a sprint if you want to reach true potential.
Of course, they will need to have scalable leadership, scalable long-term strategies, positive unit economics, scalable funding routes and a sustainable business model. With these values and the methodology of providing a positive impact and sense of purpose to create value for their customers, positive long-term outcomes are possible. This can be seen by examining the most successful companies of the last two decades.
A strong example is in the AI sector, where privacy and manipulation of behavioral data concerns are high. While these super high-tech companies often have brilliant solutions with often disruptive models, they must also consider the impact on society and respect the business — society balance.
Also, it is important to note that sustainable companies are able to maintain a long-term vision while adapting to changing situations in an ever-changing world. A sustainable business cannot be a one-trick pony. There will be cycles of change, and today’s technology startups will need to adapt with the times, just like successful companies in the past. A great example is American Express, which of course started in the mid-19th century as a transport company and only transitioned into a financial business in 1892 when it invented the Travelers Cheque, which became the standard for travelers’ monetary needs for more than a century.
Studies have shown that over the next decade, about half of the S&P 500 will be replaced.
The visions of founders drive startups, and remaining true to the vision while staying open to experiences and market conditions is vital. The framework of leadership to ensure delegation and the distribution of decision-making is key from the start. Then they can scale and grow the business. Leadership that does not implement these scalable attributes can never truly scale at speed. It should always be remembered that a successful startup is much larger than the individual leaders; it should become a living system, like a family.
The transition point takes place when founders have built teams that run by themselves, independently but with the culture and mission values of the company. The sooner this transition takes place, the sooner the company can grow and scale at speed.
For the long-term view, giving the best performance today and maintaining a view of the goal is paramount. Endurance is a key dynamic that requires balancing all aspects of a company. Stripe is a good example, as it has shown a long view since incorporation. It practiced measured growth and balance with scale and addressed all growing pains with solutions. Specializing in only small businesses before moving to large corporations, it showed measured decision-making.
The financial stack is an area that requires a great deal of skill to manage to ensure a startup reaches its full potential. It must manage various stages: initial funding to get it up and running, producing a minimum viable product, obtaining funds to develop and grow to its true potential and balancing the cost of equity dilution and debt services.
At my company, we’ve seen an increase in applications for trajectory growth funding, a method of funding the growth trajectory of the business by utilizing sophisticated real-time underwriting. This method is nondilutive and is mostly unsecured. One of the key features is its sustainability and ability to scale and grow with the startup. It’s recently a preferred choice for newly announced Unicorns.
Venture capital is an invaluable tool, but considering how strategic the funds are is critical. The most successful companies placed a great deal of attention on ensuring the early-stage funders were smart with money. As the company develops, has good product fit and works out positive unit economics, the serious growth phase takes over. And often — a few equity rounds later with positive unit economics — it becomes timely to let the company pay for the funding rather than the CAP table.
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