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The Start-Up Doom Spiral
Feb 22, 2024
I’ve been working in start-ups for a long time. That's not a brag; that’s more a “oh shit I've worked in start-ups a long time” statement of fact. You need to have some fairly severe personality iss to continue to do this over and over again. However, I love building things with impact, so here we are.
You know as well as I do that the last year has been brutal. Between rising interest rates and the contraction of funding, many start-ups are struggling. Their boards are suddenly pushing them towards profitability over growth.
Here’s the dirty secret though: these companies were never built for profitability. They were built to grow quickly, at all costs, look pretty for ever-increasing funding rounds, always with an exit in mind (ahem, acquisition, ahem). Leave the profitability problem to someone else as you drive off in your new Cybertruck.
Now these companies are stuck in shit soup with no clear spoon forward. So then they cut people and resources to hit aggressive targets because it’s easier than actually trying to make real change.
Meanwhile, there’s no healthy sales pipeline because marketing is always the first thing to get slashed. So they miss the revised targets, cut more resources, miss those targets, cut more resources, make increased and increasingly unhinged demands on the sales team, replace underperforming salespeople who were set up to fail with other underperforming salespeople who never had a chance. Lather, rinse, repeat.
It feels like companies are deploying Operation Scorched Earth: cut marketing, cut operations, double down on sales, and hope that renewals will save them. Because the growth engine has been removed or significantly slowed, they have to rely on current customers to renew and hopefully expand. If that revenue stream dries up, they are left with nothing. Churn is the kiss of death.
Now there are only two ways this story ends: the biz is either going to fail outright, or it remains a zombie: forever walking the earth as an arrested shell of itself because all its brains were sucked out in the previous rounds of layoffs.
This start-up doom spiral sinks too many companies that had capital-p Potential. This is ironic, given this comedy routine is invoked, recommended, or signed off on by board members and investors who want a return on their investment ASAP. You really have to wonder why they’re forcing the exact changes that will crush their baby.
Great leaders can pull their companies out of this nosedive through great vision, complete focus (no boondoggles), and trusting the talented teams they hire. It also necessitates getting back to business fundamentals. The need to develop the proper product-market fit, identify key verticals, focus on real use cases, and build relationships with the right types of target customers becomes even more important, as there is no extra room for wasted dollars.
Unfortunately, many will fail outright because they’re too busy scouring the past year of the Harvard Business Review for a clue, consulting some dinosaur of a mentor/advisor who remembers the good old days; or cosplaying What Would Elon Do?
The “growth at all cost” mentality was flawed from the jump. Sure, it was a hell of a lot of fun at times. But it wasn’t sustainable. Time marches on and we all have to grow up and figure out what’s next. Here’s hoping that the pendulum swings towards an equilibrium of growth and profitability.
I’ve been working in start-ups for a long time. That's not a brag; that’s more a “oh shit I've worked in start-ups a long time” statement of fact. You need to have some fairly severe personality iss to continue to do this over and over again. However, I love building things with impact, so here we are.
You know as well as I do that the last year has been brutal. Between rising interest rates and the contraction of funding, many start-ups are struggling. Their boards are suddenly pushing them towards profitability over growth.
Here’s the dirty secret though: these companies were never built for profitability. They were built to grow quickly, at all costs, look pretty for ever-increasing funding rounds, always with an exit in mind (ahem, acquisition, ahem). Leave the profitability problem to someone else as you drive off in your new Cybertruck.
Now these companies are stuck in shit soup with no clear spoon forward. So then they cut people and resources to hit aggressive targets because it’s easier than actually trying to make real change.
Meanwhile, there’s no healthy sales pipeline because marketing is always the first thing to get slashed. So they miss the revised targets, cut more resources, miss those targets, cut more resources, make increased and increasingly unhinged demands on the sales team, replace underperforming salespeople who were set up to fail with other underperforming salespeople who never had a chance. Lather, rinse, repeat.
It feels like companies are deploying Operation Scorched Earth: cut marketing, cut operations, double down on sales, and hope that renewals will save them. Because the growth engine has been removed or significantly slowed, they have to rely on current customers to renew and hopefully expand. If that revenue stream dries up, they are left with nothing. Churn is the kiss of death.
Now there are only two ways this story ends: the biz is either going to fail outright, or it remains a zombie: forever walking the earth as an arrested shell of itself because all its brains were sucked out in the previous rounds of layoffs.
This start-up doom spiral sinks too many companies that had capital-p Potential. This is ironic, given this comedy routine is invoked, recommended, or signed off on by board members and investors who want a return on their investment ASAP. You really have to wonder why they’re forcing the exact changes that will crush their baby.
Great leaders can pull their companies out of this nosedive through great vision, complete focus (no boondoggles), and trusting the talented teams they hire. It also necessitates getting back to business fundamentals. The need to develop the proper product-market fit, identify key verticals, focus on real use cases, and build relationships with the right types of target customers becomes even more important, as there is no extra room for wasted dollars.
Unfortunately, many will fail outright because they’re too busy scouring the past year of the Harvard Business Review for a clue, consulting some dinosaur of a mentor/advisor who remembers the good old days; or cosplaying What Would Elon Do?
The “growth at all cost” mentality was flawed from the jump. Sure, it was a hell of a lot of fun at times. But it wasn’t sustainable. Time marches on and we all have to grow up and figure out what’s next. Here’s hoping that the pendulum swings towards an equilibrium of growth and profitability.
I’ve been working in start-ups for a long time. That's not a brag; that’s more a “oh shit I've worked in start-ups a long time” statement of fact. You need to have some fairly severe personality iss to continue to do this over and over again. However, I love building things with impact, so here we are.
You know as well as I do that the last year has been brutal. Between rising interest rates and the contraction of funding, many start-ups are struggling. Their boards are suddenly pushing them towards profitability over growth.
Here’s the dirty secret though: these companies were never built for profitability. They were built to grow quickly, at all costs, look pretty for ever-increasing funding rounds, always with an exit in mind (ahem, acquisition, ahem). Leave the profitability problem to someone else as you drive off in your new Cybertruck.
Now these companies are stuck in shit soup with no clear spoon forward. So then they cut people and resources to hit aggressive targets because it’s easier than actually trying to make real change.
Meanwhile, there’s no healthy sales pipeline because marketing is always the first thing to get slashed. So they miss the revised targets, cut more resources, miss those targets, cut more resources, make increased and increasingly unhinged demands on the sales team, replace underperforming salespeople who were set up to fail with other underperforming salespeople who never had a chance. Lather, rinse, repeat.
It feels like companies are deploying Operation Scorched Earth: cut marketing, cut operations, double down on sales, and hope that renewals will save them. Because the growth engine has been removed or significantly slowed, they have to rely on current customers to renew and hopefully expand. If that revenue stream dries up, they are left with nothing. Churn is the kiss of death.
Now there are only two ways this story ends: the biz is either going to fail outright, or it remains a zombie: forever walking the earth as an arrested shell of itself because all its brains were sucked out in the previous rounds of layoffs.
This start-up doom spiral sinks too many companies that had capital-p Potential. This is ironic, given this comedy routine is invoked, recommended, or signed off on by board members and investors who want a return on their investment ASAP. You really have to wonder why they’re forcing the exact changes that will crush their baby.
Great leaders can pull their companies out of this nosedive through great vision, complete focus (no boondoggles), and trusting the talented teams they hire. It also necessitates getting back to business fundamentals. The need to develop the proper product-market fit, identify key verticals, focus on real use cases, and build relationships with the right types of target customers becomes even more important, as there is no extra room for wasted dollars.
Unfortunately, many will fail outright because they’re too busy scouring the past year of the Harvard Business Review for a clue, consulting some dinosaur of a mentor/advisor who remembers the good old days; or cosplaying What Would Elon Do?
The “growth at all cost” mentality was flawed from the jump. Sure, it was a hell of a lot of fun at times. But it wasn’t sustainable. Time marches on and we all have to grow up and figure out what’s next. Here’s hoping that the pendulum swings towards an equilibrium of growth and profitability.
I’ve been working in start-ups for a long time. That's not a brag; that’s more a “oh shit I've worked in start-ups a long time” statement of fact. You need to have some fairly severe personality iss to continue to do this over and over again. However, I love building things with impact, so here we are.
You know as well as I do that the last year has been brutal. Between rising interest rates and the contraction of funding, many start-ups are struggling. Their boards are suddenly pushing them towards profitability over growth.
Here’s the dirty secret though: these companies were never built for profitability. They were built to grow quickly, at all costs, look pretty for ever-increasing funding rounds, always with an exit in mind (ahem, acquisition, ahem). Leave the profitability problem to someone else as you drive off in your new Cybertruck.
Now these companies are stuck in shit soup with no clear spoon forward. So then they cut people and resources to hit aggressive targets because it’s easier than actually trying to make real change.
Meanwhile, there’s no healthy sales pipeline because marketing is always the first thing to get slashed. So they miss the revised targets, cut more resources, miss those targets, cut more resources, make increased and increasingly unhinged demands on the sales team, replace underperforming salespeople who were set up to fail with other underperforming salespeople who never had a chance. Lather, rinse, repeat.
It feels like companies are deploying Operation Scorched Earth: cut marketing, cut operations, double down on sales, and hope that renewals will save them. Because the growth engine has been removed or significantly slowed, they have to rely on current customers to renew and hopefully expand. If that revenue stream dries up, they are left with nothing. Churn is the kiss of death.
Now there are only two ways this story ends: the biz is either going to fail outright, or it remains a zombie: forever walking the earth as an arrested shell of itself because all its brains were sucked out in the previous rounds of layoffs.
This start-up doom spiral sinks too many companies that had capital-p Potential. This is ironic, given this comedy routine is invoked, recommended, or signed off on by board members and investors who want a return on their investment ASAP. You really have to wonder why they’re forcing the exact changes that will crush their baby.
Great leaders can pull their companies out of this nosedive through great vision, complete focus (no boondoggles), and trusting the talented teams they hire. It also necessitates getting back to business fundamentals. The need to develop the proper product-market fit, identify key verticals, focus on real use cases, and build relationships with the right types of target customers becomes even more important, as there is no extra room for wasted dollars.
Unfortunately, many will fail outright because they’re too busy scouring the past year of the Harvard Business Review for a clue, consulting some dinosaur of a mentor/advisor who remembers the good old days; or cosplaying What Would Elon Do?
The “growth at all cost” mentality was flawed from the jump. Sure, it was a hell of a lot of fun at times. But it wasn’t sustainable. Time marches on and we all have to grow up and figure out what’s next. Here’s hoping that the pendulum swings towards an equilibrium of growth and profitability.
