The Series A Crunch is a hot topic now in entrepreneurship circles. Over 1000 companies are facing their own "fiscal cliff" of being unable to raise a subsequent round of capital post their seed rounds.
I posit that in order to get past the fiscal cliff, companies need to focus on a few core fundamentals:
1. Romeo Tango Bravo: "Return to Basics", or rather, focus on your core competence as a business during this challenging time and eliminate everything else. Many companies have increased their burn with premature scaling and additional expenses. NOW (if you haven't done it already) is the time to cut expenses to the bone. Kill the office, drop the service providers, reduce the over-provisioned AWS servers. Have employees transition to 1099 consultants and pay them for performance. Return To Basics.
2. I to the Power of WE: Time to use your network like never before. The only way you can scale without resources right now is to leverage the collective networks of the people you know, and not in an accidental way. Make tapping into your network 25% or more of your time every day. Ask for deals, ask for help raising capital, ask for freebies. Get your message out to the people who trust you and know you, and the people they know.
3. Customers First: Yes, the cliff is about inability to get synthetic capital into your company, but now is not the time to forget organic capital. Ask your customers to help. Get annual prepays up front to offset the cash flow gap. Scrutinize your CAC and Customer carrying costs; if your customers cost you more every day then they pay, you have to change the balance. Time to throw the unprofitable models used to get VC interest ("up and to the right, even if we're losing money") away, and get back to the basics of any business. You have to bring in more cash than you spend. Period.
Last, recognize that this is not an abnormal event. This is normal business and market forces are doing their thing. Don't get wound up in believing this is a special time in financing; in fact if you leave the world of tech and spend time with companies in other sectors, the "Series A Crunch" is called "Regular Life".
Deal with it.
I posit that in order to get past the fiscal cliff, companies need to focus on a few core fundamentals:
1. Romeo Tango Bravo: "Return to Basics", or rather, focus on your core competence as a business during this challenging time and eliminate everything else. Many companies have increased their burn with premature scaling and additional expenses. NOW (if you haven't done it already) is the time to cut expenses to the bone. Kill the office, drop the service providers, reduce the over-provisioned AWS servers. Have employees transition to 1099 consultants and pay them for performance. Return To Basics.
2. I to the Power of WE: Time to use your network like never before. The only way you can scale without resources right now is to leverage the collective networks of the people you know, and not in an accidental way. Make tapping into your network 25% or more of your time every day. Ask for deals, ask for help raising capital, ask for freebies. Get your message out to the people who trust you and know you, and the people they know.
3. Customers First: Yes, the cliff is about inability to get synthetic capital into your company, but now is not the time to forget organic capital. Ask your customers to help. Get annual prepays up front to offset the cash flow gap. Scrutinize your CAC and Customer carrying costs; if your customers cost you more every day then they pay, you have to change the balance. Time to throw the unprofitable models used to get VC interest ("up and to the right, even if we're losing money") away, and get back to the basics of any business. You have to bring in more cash than you spend. Period.
Last, recognize that this is not an abnormal event. This is normal business and market forces are doing their thing. Don't get wound up in believing this is a special time in financing; in fact if you leave the world of tech and spend time with companies in other sectors, the "Series A Crunch" is called "Regular Life".
Deal with it.
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