In today’s startup landscape, with the ever-evolving VC market conditions, it’s more important than ever to have early revenue before dedicating valuable runway to seeking out and knocking on investors’ doors.
In 2024, the venture capital market is as competitive as ever. While there’s still ample capital available, savvy investors are becoming increasingly selective.
The number of startups receiving funding has plateaued, with only a fraction of companies successfully securing investment compared to previous years.
So, what does this mean for you as a founder? It means that you need to stand out from the crowd.
Traction speaks louder than words (and pitch decks)!
Now, I get it. Building systematic revenue is not easy, especially with few resources available to founders to help them execute go to market (especially as compared to the amount of resources helping founders go to product).
So, how can you prioritize revenue?
Focus on Customer and Market Development, Not Sales
On the path to product market fit your focus should be on customer and market development, not sales. The distinction is important.
Sales is the pursuit of revenue for the purpose of profit. Customer and market development is the pursuit of revenue for the purpose of learning.
A brute force attack fueled by too much venture capital rarely wins. Betting on that type of “winner-take-all” approach is even less realistic in rising cities, where there is less available venture and fewer venture wins to pattern-match against and from where you’ll find the been-there-done-that talent to help you accelerate.
Building towards something that scales big and fast (i.e., venture-capable) requires a solid foundation. And there is no more solid foundation for building a venture-scalable business than an early laser-focus on your ideal customer profile.
This initial target market (i.e., beachhead) is a small segment of your total addressable market, enabling you to deliver highly relevant messaging and value that resonates deeply with a specific customer type and use case. Given the drastically reduced cost of starting a company and building your MVP, for most software startups, your ICP is often much larger than you need to get to break even and cash flow positive.
Bootstrap and Stay Lean
Keep your expenses low and maximize efficiency in every aspect of your business. Embrace the mindset of bootstrapping and focus on achieving profitability with minimal resources.
External funding will not be as readily available, as investors exercise more caution in the wake of market fluctuations and global events.
Moreover, the rapid pace of technological advancement – especially AI – demands that startups stay agile and adaptable. By bootstrapping, you can maintain greater control over your direction and pivot more easily in response to market changes or emerging opportunities.
Perhaps most importantly, bootstrapping fosters a culture of resourcefulness and frugality. By learning to do more with less, you can build a strong foundation for sustainable growth, focusing on building a loyal customer base without the pressure of meeting unrealistic growth targets dictated by investors. This approach not only increases the chances of survival but also sets the stage for long-term success and a healthy balance of growth and profitability.
Venture capital should not be your primary focus in the early stages. Instead, shift your attention to generating revenue and building systematic and sustainable growth. Not only will this increase your chances of attracting investors down the line, but it will also set you up for long-term success in an increasingly competitive market.
Remember, revenue speaks volumes. So, roll up your sleeves, focus on delivering value, and watch your startup thrive.