Editor’s Note: Each week, Maynard Webb, former CEO of LiveOps and the former COO of eBay, will offer candid, practical, and sometimes surprising advice to entrepreneurs and founders. To submit a question, write to Webb at dearfounder@fastcompany.com.
Q. We are a brand-new company, just getting started. What’s the number-one thing I should be worried about?
—Founder of an early-stage startup
Dear Founder,
I like this question. It leads me to think that you are thinking big—thinking holistically.
So, I think you’ll appreciate my answer: Whatever you do, don’t settle for being a “tweener”—a company that’s stuck in the middle, neither a runaway success nor an utter failure but somewhere in between.
Sure, we know and love the breakout stories—those A+ ideas that took off from the beginning, like Facebook, Google, or eBay. Yet, we also know that these companies are very rare. Oftentimes, the world is not ready for a new idea, and the majority of companies don’t get traction. Intrepid entrepreneurs go back to the drawing board and pivot, but that maneuver is not representative of the reality of startups. Most companies fall in a middle space—there’s some traction, but the flywheel isn’t spinning, and you’re not sure if the idea will scale. This uncomfortable middle place is Tweenerland, and it’s a dangerous place to be.
What do you do to avoid it? You move faster and keep getting more done. Set your goals: What do you want to have accomplished by the end of the year? Now, make it specific: How many people will you employ? What revenue will you reach? How much will you raise from investors?
Remember, time is not on your side. It is always moving, and you will never have enough of it. The minutes and hours and days will go by, and if you don’t make progress every moment, you won’t get ahead. You will never get back the time you spent, so spend what you have wisely.
Q. I am more convinced than ever that I’m on to something, but I am struggling to raise money. What should I do?
—CEO of a marketplace company
Dear Founder,
It is great that you are convinced, but if no one else believes in your idea, it’s time to dial down your expenses (and quickly) so you can build traction and show people what you have—before it’s too late. You don’t want to run out of cash. When that happens, you also run out of options.
The situation that you find yourself in is usually one that is long in the making. It is often the result of decisions that were first made some time ago. Perhaps you’ve been ambling along, not getting traction, releasing one new feature here and there but burning too much cash. And now it’s dangerously late, putting you in a precarious position.
Investors like to see that you have been conservative with your burn rate in the early days and that you preserve cash until you know you are onto something that can scale. They like to see weekly status updates—and that you deliver on the promises that you make. Have you done that? Can you start doing that immediately?
I respect that you have something fresh and new, but relying on hope that people will just give you money for that is naïve. If you are not getting traction with customers and investors, you will likely need to cut the burn rate to give yourself the time to get traction.
If you are running out of cash and no one is excited about your company—as painful as it is—you must cut burn rate so you can conserve your cash and have more time to get yourself to a place where people are willing to invest. Good luck!
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