Finance & Fundraising

Toxic VC and the Marginal-Dollar Problem

Venture capital has a great expectation for growth and, with it, comes a great pressure to perform. In the quest to grow as big and fast as the Unicorn-crazed market expects, companies find themselves scaling with consequence. After all, not all growth is healthy growth. This article takes a contradictory look at the tough decisions start-ups must face to stay healthy in the face of VC funding.

Key Takeaways:

  • Growth at what cost? Growth without context can quickly become a vanity metric.
  • VCs desire to “go big or go home” and what that means, even for successful teams.
  • Inefficiences at scale can spell disaster (and even death) for a company.

Read the TechCrunch article

Why Can’t SaaS Companies Just Mint Cash?

The natural trade-off between burn rate and profitability is one that keeps many CEOs up at night. This SaaStr article explains why no two SaaS companies are the same in terms of how quickly cash is spent and how important it is to be profitable. Plus, it offers some ideas on how to better gauge and understand key metrics when asking this trade-off question.

Key Takeaways:

  • Every SaaS company is different in terms of burn rate/profitability because there is no standard formula.
  • Important things to do if cash does matter to your company.

Read the SaaStr article

The 10x Rule: What Raising $1 of Venture Capital Really Means

So often a CEO will aggressively raise as much money as possible. This SaaStr article argues against the need to do just that because of the importance of taking exit valuation into consideration and how a bigger valuation may hurt a company’s chances at being acquired.

Key Takeaways:

  • Assume when you raise money that you must raise 10X for an exit.
  • Big companies look for “tuck-in” opportunities so raising too much capital could hinder your chances to be acquired.
  • For many companies, IPOs may be the only option for exit.

Read the SaaStr article