Nic Brisbourne

For these pre-product market fit companies raising a lot of money early is occasionally the right thing to do – mostly when the competition is, or is likely to be, fierce – but for most of them it makes sense to keep things lean until the unit economics are established and Most founders who raise a round like this follow the expense side of the plan, but if they are pre-product market fit they don’t know if the revenues will follow. I’m as excited about being part of massive companies as everyone else in this industry, but it’s important to recognise that there are lots of great companies that don’t reach $1bn in value, but do make a meaningful contribution to society and deliver great outcomes for their founders and early investors. Generally speaking, and to simplify, that means staying lean unless or until it’s clear the outcome can be very big, or, in more detail, start lean and become progressively less lean only as the scale of the opportunity becomes clear.

Starting a company is a big risk and founders invest a lot of themselves into their companies – a lot of time, a lot of emotion and a lot of money (whether by way of direct investment of opportunity cost of a higher salary that could be earned elsewhere). And then the negative voices can start, I’ve wasted my career, I’m a failure, nobody will ever want me, I won’t be able to keep up the payments on my house etc. * They don’t push potential customers and partners to a ‘yes’ or a ‘no’, preferring to let time pass and have more meetings rather than take the chance of getting a ‘no’ that might be too hard to hear. That’s panning out, but our Plan B was a calculation that if all the extra investment turned out to be a waste of money then the fund would still make OK profits so long as the investments performed as well as companies I had backed in the past.

When we unpicked it, the logic behind the question is that if there is a small amount of revenue, maybe with small month on month increases, then projections of much larger month on month increases going forward might look less credible than if there were no revenues at all. I say almost always because the caveat (and this applies to all fundraising advice, and isn’t said enough) is that fundraising success often comes down to just one new person falling in love with your idea, and that generalisations like the one I’m making here might apply to the majority of investors, but they will never apply to all of them. Then the second thing to say is that projections which involve a step change are always harder to believe than projections which are based on an extrapolation of existing trends. Returning to the case in hand – if there are small revenues and small increases, an extrapolation of existing trends won’t look very exciting.

There’s an old adage that if you don’t measure something it doesn’t happen and I think there’s a tonne of truth in that. The problem is that they forget quickly, particularly when the team grows and the people managing to the proxy weren’t there when the conversation about it being a proxy was had in the first place. Arguably that’s what’s happening in the UK and US education systems right now, where schools have been measured on standardised test scores for some time and teachers are now ‘teaching to the test’ at the expense of a more rounded general education. Whilst the NHS is definitely creaking under the pressure of increasing patient numbers and increasing cost-per-patient, it’s my belief that these targets have helped managers to focus on what’s important and improve the quality of the health service provided to us all here in the UK.