Thread by @DavidSacks

Startups: Instead of thinking about whether you are “default alive” vs “default dead”, think about whether you are “default investable” vs “default uninvestable.” 🧵

“Default alive” is almost an impossible standard for early-stage startups since it means being cashflow positive.

On the other hand, “default investable” means that your metrics are good enough to raise another round in the current environment.

You’ve got to be realistic about whether you are investable. It takes mostly “great” metrics, maybe one or two “good” ones, and no disqualifiers (“danger zone”). We’ve tried to be precise about what this means for SaaS startups.

If you’re not currently investable, you’ve got to give yourself adequate time to fix your metrics. Tinkering, experimenting, finding PMF — all of that takes time. Fixing problems in the business is typically more successful with a lean team anyway.

Remember that you can’t wait until the end of your runway to fundraise. 2 years of runway is really only 5-6 quarters to fix problems. 2.5 years of runway is much better — 8 quarters to fix problems.

Who should embrace the “default alive” standard? Later stage startups with low growth rates. Eg, $100M ARR growing 50% YoY. This is now completely uninvestable by growth-stage VCs. These companies would be better off realigning to PE model. Become cashflow positive, then grow.

In summary, there are 3 states that are ok:
1. Cashflow positive - always good obvi.
2. Cashflow negative but VCs are truly willing to finance that growth. (Be realistic about that.)
3. Low burn, long runway, fixing metrics to become 1 or 2.

Everything else a no man’s land.