Rebecca Kaden: One of the great things that I really love about entrepreneurship and company building and being an early stage investor is, there’s definitely no one way to build a company. It’s about finding the right model for the business you’re building and your goals.
There’s also no one way to kill it. Companies get killed by overfunding. Companies get killed by underfunding. Companies get killed by co-founder problems. There’re all kinds of ways that these companies don’t work. So the biggest thing is, can you find the model that is the right fit for the product that you are building, the team that you’ve assembled, and the goals you have in mind? Can you out-execute competitors on the right model for what you’re doing?
Sramana Mitra: Because we work with a very large number of entrepreneurs out there, for the vast majority of these entrepreneurs, blitz scaling isn’t going to work. Because most companies and most businesses don’t lend themselves to a blitz scaling strategy. If they tried to practice this scaling strategy, they won’t work. We have done a lot of research to find what reduces the probability of failure.
The counterpoint of it is, what increases the probability of success. We’ve come to the same conclusion as you in that capital efficiency and getting to sustainability requiring small amounts of capital, paying attention to unit economics and fundamentals is a better way of building businesses for the vast majority of entrepreneurs out there. It also allows for a lot of entrepreneurs who are working on smaller niche ideas to be successful.
Because all those other strategies don’t apply to the ones who are not necessarily venture fundable, we support that community of entrepreneurs very heavily as well. So, bootstrapping was better in those kinds of scenarios. There’s a lot of confusion in the market.
People are reading the messages coming from Reid Hoffman talking about blitz scaling. If across the board you decide that it’s blitz scaling or nothing, that’s not very healthy for the vast majority of entrepreneurs for whom blitz scaling is not going to be an option.
Rebecca Kaden: If you’re a venture firm like USV, just by our own model, we can’t be focused on the vast majority of entrepreneurs. We’re trying to be focused on the outliers. For most businesses, venture doesn’t benefit. It hurts. You’re selling a huge amount of your business up front. There’s a lot of risk and pressure that comes with venture funding. It’s not the right model for many businesses depending on the firm that you’re taking it from.
But a firm like Greylock and for USV, we are focused on a certain type of exponential growth to meet our model which isn’t the right path for many different companies. It comes back to narrowing in on what is going to be the right model both from a capital-raising perspective in terms of who you’re taking money from, how much, and the scale and cadence for the exact business that you’re building.
It’s difficult when you’re surrounded by a lot of messages really promoting venture and glorifying it. But it’s important as a founder to be able to tune that out and really think about what makes sense or what you, in particular, are doing.