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The aftermath of raising too much cash

by

Sammy Abdullah

At the link below is one of the best startup post-mortems I’ve ever read. It’s by a founder of a company called Moz. The business had fantastic growth out of the gate, took on major VC money, tried to scale too quickly letting hiring and costs got ahead of growth, and ultimately they had to scale back significantly.Poor margins and high fixed costs makes it extremely hard to cut costs in SaaS because any cut is a personnel cut that you probably need such as dev, sales, customers success, etc. If you’re a SaaS business, scale carefully and within your means, because SaaS’s low margins and high fixed costs make it very hard to turn back.Restructure while you still have cash. The post states “With 12 months of cash in the bank and growing revenue, did Moz *have* to do layoffs in August? No. We could have carried on, done our best to limit non-personnel expenses, and tried to get growth fast enough to catch up to our expenses before we ran out of money entirely. But I believe, as did our leadership team and board of directors, that making the company cash-flow positive ASAP was the right thing to do.” These founders truly had guts and the wherewithal to recognize a restructuring was inevitable: they could either make the cuts now while they still had cash on the balance sheet, or they could burn through the cash and make very deep cuts later when they were out of cash. The former is always the better choice although it’s harder to do. Kudos to management for being fearless.Overall this is a phenomenal post. All the best to the Moz team.Visit us at blossomstreetventures.com. Email Sammy directly at

Sammy Abdullah

Managing Partner & Co-Founder

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