Build a product for one market. Our portfolio company built phenomenal technology but didn’t actually productize for a specific use case. The technology had many use cases and applications, but we failed to apply it to one single product and focus that product on one single market. As a result, we weren’t recognized in any field, we weren’t thought leaders, and the sales team never focused on one niche were it could become an expert selling a solution. We were dumb generalists selling a technology with no domain expertise or industry focus. Build a real product, focus on one market and use case, and don’t move to a new market until you’ve successfully established your company in that original market.
Cash is king. We did not grow fast enough given the cash burn. Period. If you’re going to burn cash, make sure you’re growing fast enough such that you can easily justify raising a new round at a new valuation when you’ve only got 8 months of cash left. If the revenue to burn ratio is too high and growth rate too low, if you’re lucky you’ll end up with a down round. If you’re unlucky, you’ll die.
Know when it’s time to exit. Ironically enough, we had three opportunities to exit this business. In one case, we would have actually made money and the other two cases, we would have recouped about 80 cents on the dollar. In hindsight these would have been fantastic outcomes rather than zeroing out, but at the time these outcomes were viewed as very disappointing and no one wanted to get behind them. Each time we should have seen the exit through: investors would get some money back, the VC could focus on other companies in their portfolio, and the founders get to start fresh as ‘serial founders’. Knowing when it’s time to walk away is valuable.
Stay heads down. Your time is well spent visiting with major customers, major prospects, working with your employees on their problems, putting out content that makes you a thought leader in your space, and attending the biggest conference in your industry once a year. Your time is poorly spent talking to VC outside of your fundraising cycles, going to startup events, mentoring other startups, spending too much time with current investors, putting together massive decks for board meetings, etc. Basically spend more time building the business and less time on everything else.