How to Survive When Your Startup Becomes Bigger Than You

Weekly Business Insights from Top Ten Business Magazines | Week 331

Extractive summaries and key takeaways from the articles curated from TOP TEN BUSINESS MAGAZINES to promote informed business decision-making | Since September 2017 | Week 331 | January  12-18, 2024

Entrepreneurship Section | 1

How to Survive When Your Startup Becomes Bigger Than You

By Joe Procopio | Inc Magazine | January 8, 2024

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What are you going to do if you can’t make payroll next month?  Relax. You’re fine. Probably.  But that question is still going to keep you up at night, especially once you’ve reached a certain point of no return on your startup journey — and that’s when your business grows beyond the level where you can keep funding it out of your own pocket.

The Funding Paradox.  Starting companies would be the most fun and satisfying career ever — if you didn’t have to figure out how to fund them. In fact, there are a few binary decisions during the early stages of a startup journey that are increasingly risky personal financial commitments:  Founding your company (low risk, low reward).  Launching your first offering (low risk/high reward — if done right).  Hiring your first employee (high risk, low reward — trust me on this).  Signing your first massive deal (high risk, high reward). Founders who achieve any of these milestones should be proud of themselves, because it means they’ve accomplished something significant. It also means they found a way to get there.  

There are a lot of easy ways most founders choose.  

The Easiest Answer.  Venture Capital Investment.  Venture capital funding is by no means an easy answer. It’s essentially taking a second job alongside running your company, and it means serving copious needs other than your company’s own. Here’s the problem. Most founders think that they grow right along with their startup, and they do, to an extent. Just not financially. When that first tranche of venture funding dries up, and the progress made with that funding isn’t in line with the projections that produced that funding, a founder’s access to capital is actually severely reduced, not increased.  That keeps you awake.

But there are answers — and they can be aggregated into a strategy. Here it is.

Build Your Forever Company.  Whenever the author starts a new company or a new project, at some point after he has fleshed out the idea but before he gos to market, he makes sure he develops a plan to run that company on bare bones if he has to, for as long as he has to.  Then, for each funding decision he makes afterwards, he plans for that funding to get him not just to the next level, but the level after the next level, and preferably a couple levels after that. To put it simply, before he hires a person, he makes sure he has the funding to hire two people.

So make sure you’re building your forever company, and at least you’ll have a better chance sleeping at night.

3 key takeaways from the article

1. What are you going to do if you can’t make payroll next month?  And that’s when your business grows beyond the level where you can keep funding it out of your own pocket.
2. There are a lot of easy ways most founders choose.  The Easiest Answer.  Venture Capital Investment.  But the problem is when that first tranche of venture funding dries up, and the progress made with that funding isn’t in line with the projections that produced that funding, a founder’s access to capital is actually severely reduced, not increased.
3. The answer is Build Your Forever Company.  Makes sure you develop a plan to run your company on bare bones if you have to, for as long as you have to.  For each funding decision you make afterwards, plan for that funding to get you not just to the next level, but the level after the next level, and preferably a couple levels after that.

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Topics:  Entrepreneurship, Growth, Startups