I was chatting with a venture capitalist at a holiday party. It was being hosted by an early-stage, venture-backed startup I occasionally consult with. After the VC had a few glasses of wine in him, he began complaining about the event.
“What a stupid waste of money,” he grumbled between sips or cabernet. “These guys missed their fourth quarter revenue goals this year and are hemorrhaging money, but here they are throwing a big party for their employees like they’ve got all the cash in the world.”
I appreciated his candor. Any time I can get VCs telling me what they really think, I consider it a big win. And, at first glance, I could appreciate why he was annoyed. After all, a company missing revenue goals and losing cash probably doesn’t seem like a company that should be throwing big holiday parties, but I actually disagreed with him. In fact, I was the person who’d advised the CEO to throw the party.
The startup I was working with was experiencing rapid growth. Sure, it wasn’t “rapid enough” growth in the eyes of the VC I was talking with, but that’s a different issue. In reality, the startup was doing great. It had found product-market-fit and was growing fast, which is what every venture-backed entrepreneur aspires to. But the founder was struggling. He was a “product guy” who’d spent most of his career focused on software development and, occasionally, doing one-to-one selling; however, he didn’t have any experience running businesses.
That lack of experience was a big problem for a rapidly growing company because, as CEO, his job was no longer about coding and selling. His job was to build teams and manage people.
To his credit, he was surprisingly good at recruiting great talent. But the talent wasn’t gelling, hence the issue the VC had been complaining about. The company had missed its Q4 revenue goal, and there was already some grumbling among the new staff about people jumping ship.
To be clear, the missed revenue goals were an overblown issue. The only reason the…