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What are some ways in which Start-ups meaninglessly burn out their funding?

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JASON LEMKIN

The #1 issue I see is not understand what investments really are accretive — and which aren’t.

Money is there to invest. You don’t need ROI in sixty minutes. But:

  • A sales rep that can’t hit quota in a few months = cash drain.
  • A VP of Marketing that can’t get you leads & opportunities = cash drain.
  • A customer success team that can’t drive down churn and drive up NPS = cash drain.
  • An engineer that can’t ship a core feature or upgrade on time-ish = cash drain.
  • Etc. Etc.

I.e., hiring to fill an org chart drains all the cash – fast. This is what I see all the time.

Hiring still quickly … but where the hires, at least as a group, pay for themselves over the next 12 months or less … burns nothing net. And so that’s a great use of your precious, expensive, equity capital.

If you don’t understand how the next few employees are accretive, take a pause. You always know for the first 5, 10, 15, 20. But as you scale, after 40 or 50, sometimes you don’t know.

You should.

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Published on January 25, 2017
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