By Itay Sagie
As an entrepreneur, you did it—you realized your vision, raised capital, built a company and your product is now being used in the wild. You might even be profitable. So what’s wrong?
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You begin to notice that there are more competitors out there, raising more money than you, starting to chip away at your customer base, churn is beginning to be an issue, cash is starting to run low, and new investors shy away from your next round of financing.
You understand you’re on a plateau and you must change something to grow again. As tensions run high, you experiment with various pivots that end in a faster cash burn and little outcome.
I realize every company is a universe of its own and there is no magic pill for everyone, but I would like to share three points that may provide some direction toward growth:
1. Focus on perfecting product-market fit
If cash is low, then attempting to attract a new market or build a new line of products is too expensive and time-consuming. I would suggest focusing your limited resources on your core strengths and existing clients.
In other words, significantly improve your monetization and retention strategies.
2. Get a fresh perspective
You, the founder, have been boiling in your own water for years, which may create tunnel vision with regards to your strategic options.
An external adviser may notice overlooked growth opportunities, will challenge your core assumptions, will reevaluate your processes, and will notice a better way toward growth.
3. Challenge your assumptions
When tech-focused entrepreneurs run into a challenge, they try to solve it with even more tech. However, in most cases, tech is not the most burning issue.
Challenge your core assumptions with these questions:
Am I targeting the right audience? For example, maybe you are chasing Fortune 500 companies, but in fact, your product is not enterprise-grade. This may explain why you spent two years chasing down large clients and not a single one converted into a paying customer. In this case, I would work hard to identify the best audiences and a relevant go-to-market strategy to reach those audiences.
Are my unit economics headed in the right direction? Check the fundamentals. Try to see if you can segment your unit economics byproducts to focus on specific issues. If your unit economics are off, you have immediate work on your marketing strategy, sales strategy, farming strategy, pricing model, business model and more. Read more about unit economics in this earlier Crunchbase article I wrote.
Do I have enough cash? Should I raise money? When? In most cases, when growth is slowing down your cash may not allow you to drastically pivot into a new direction, a new market, or a new line of products. Therefore, attempting to try new bold strategies without raising capital will simply mean you will have a much shorter runway. My suggestion is to start with fixing some of the burning strategic issues that will quickly impact your growth, and then raise capital.
The closer you get to sustainable growth, the easier it will be to negotiate great investment terms.
Itay Sagie, a guest contributor to Crunchbase News, is a lecturer and strategic adviser to startups and investors in finance, growth and M&A. He founded VCforU.com and Sagie Consulting. You can connect with him on LinkedIn and follow him on Twitter at @itaysagie.
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Illustration: Dom Guzman
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