‘Just break even’ may be the worst possible advice for startups in turbulent times

The economic turbulence of the last two years has forced startups to look for new survival strategies. Today, startups generally fall into two camps: a minority that can afford to continue doing business as usual because they have a strong market position and a powerful financial base and the majority that is forced to adapt to ever-changing conditions.

Among the latter, there are two types:

  1. Those that are faring badly.
  2. Those that might soar but could just as easily plummet.

The venture market is not about achieving steady growth, and when a startup favors profits over ambition, the whole point of its existence is moot.

In these turbulent times, only a miracle could help the first type succeed. The second type, however, has every chance of not only surviving but thriving. This makes it critical for them to make the right strategic decisions now.

At this crucial juncture, the views of venture capital market leaders, mentors and experts carry greater weight, and many of them have publicly and unequivocally advised founders to lengthen their project’s runway and push it into the black. A significant number of companies have enthusiastically embraced this idea, but the sad truth is that, this is probably the worst possible advice for most startups right now.

One of the most interesting companies in our portfolio almost fell victim to this advice. A mentor advised the founder to lengthen their runway as much as possible. We looked at how they would have accomplished this and discovered that the proposed cost-saving measures would have practically destroyed growth. At that point, the project would have not been of interest to anyone. Why?