Thread by @daveambrose

a founder in a very competitive, VC-backed marekt stopped by today to give an update on her business. she’s been building the co. for a few years.

her update stressed a few themes that I keep thinking about about the oddities of venture capital, so sharing them in this thread.

her competitors raised ~$100m+ from VCs but she struggled to raise ~$4m.

she struggled because:

1. the co. wasn’t a “perceived” leader by investors, so raising was hard.
2. investors believed the market was “winner take all” and only wanted to make positions in a “leader”.

she had either a choice to give up and sunset the company or build something that was sustainable. she chose the latter.

getting to profitability forced her to:

1. focus
2. constrain
3. do one thing well, i.e. deliver revenue

while she was acquiring paying customers, her competitors continued to raise capital to gain market share. by market share, these were customers who were not paying but on trials. interesting "breaks" started to occur for her.

these competitors started to take action that's required (often) by VC-backed + perceived "winner take all" markets.

1. competitors ramped sales people so quickly that customer churn occurred.
2. market share != always mean great unit economics
3. valuations didn't match metrics

so, now around 1.5-2 years passed and she's still growing her company profitably by 80% YoY (not 200% YoY like her competitors were doing when they raised VC). she's starting to notice competitors are laying off talent and now struggle to raise.

what was interesting now, after a few years since she started and making the "hard" decision to become profitable, was that her business started to look like it was really ready for funding:

1. she had repeatable sales
2. positive unit economics
3. great, growing customer base

in something she didn't expect (and when she shared this, I just 😀): "we had to make these hard decisions to stay alive and funny enough, and I guess that's how timing works, we're now inundated w. VCs wanting to write 8-figure checks because we outlasted."

sharing this story because I think it's just so easy for either a VC or an entrepreneur to be measured (or focused) on growing at all costs, to gain market share or to win "mega" rounds. that's not winning.

winning is become durable and sustainable, delivering customer value.