So there are times in startup life when it seems like a wave is just overpowering you, that there is only so much you can do. And so many times, when you need to address a challenge, you may quietly feel limited by the team you have. There’s only so much you can do, just so quickly. So many times you’ll default, partially, to Doing Nothing. For now.
This works better at Bigger Companies, where real change is often measured in 5+ year chunks. But startups aren’t always as agile as social media paints them to be. There’s just so much code 15 folks can push out, so many markets a 2-person marketing team can enter, etc. etc.
Still, one of the top mistakes every top founder says they made is this: “I Should Have Acted on Bad Trends Earlier.”
Let’s make a list:
#1. A Burn Rate That is Too High
Venture capital is meant for investing, for sure. But there’s a fine line between investing and keeping a leaky boat and set of metrics afloat. Almost every founder regrets using capital to keep a high-burn rate engine going that isn’t scaling rapidly. Using venture capital to buy a little time is OK. But after that, don’t throw good money after bad trends.
#2. Not Jumping on High Churn
Some types of churn certainly can be addressed over time. It can take years for some SMB SaaS companies to hit and cross 100% NRR, for example. But if your churn and retention numbers aren’t at least mid-pack for your category, don’t let it lurk. Churn is a problem that lurks, especially in annual deals. If your churn is too high, a lot of that revenue isn’t even real.
#3. Investing in Segments That Can Never Be Profitable
This is a subtle but important one. We all have to expand from our initial ICP and initial top markets. But it’s almost always expensive to grow beyond that core. So especially as founders you have to be incredibly thoughtful here. Does expanding from plumbers to mechanics really work with your product? Will marketers really buy your product if sales execs do? You have to try, you have to expand, you have to grow. But many startups end up investing in segments and categories that end up never being able to scale for them, at least not for now.
#4. Not Addressing Deteriorating Sales Performance
Things just change in sales. Sometimes, it’s bringing in a new VP of Sales or CRO that can’t deliver. Sometimes, it’s growing too quickly. Sometimes, it’s just hiring too many reps, too quickly. Or too many of the wrong types of reps. Whatever it is, sales efficiency should and will go down to some extent over time, no matter what you do. And it should go down again as you enter new markets, go upmarket, etc. But too much deterioration is almost always a sign to make a change. Sam Blond CRO of Brex here and I did a deep dive in part on that topic here. The learnings? Fewer, better reps is almost always better. Even in hypergrowth mode.
#5. Falling Behind The Competition (For Real)
We worry a bit too much about competition in SaaS. It’s just so visceral to lose that big deal, to see them raise that big round, etc. Worry more about making your customers successful, a little less about what the others do. Still, you are either getting more competitive every quarter, every year in SaaS — or less competitive. Nothing is static. As founders, you have to step back and be aware and analytical. Are we less, or more competitive than 12 months ago? Is our win rate going, up or down? Are we shipping faster or slower than they are? Are the very best customers in the industry picking us more often — or them? It’s hard enough just to make progress in general. But if you are falling behind the competition, you have to find a way to move even faster.
A bit more on that here:
No doubt, slow down big decision, speed up the rest. Take a few months to address big changes in the market if you need to.
But then pick yourself up, and step it up. You’ll always look back and wish you’d reacted to tough trends, tough changes, earlier.
