Spend the money.
Runway won't make you safe and profitability is predetermined.
Everyone wants to feel secure in their 36 months of runway. “We’ve got plenty of time to figure it out.” But just sitting on cash won’t improve your odds of being right.
Instead, you have to turn over cards and hit your goals - whatever they may be. It doesn’t matter if “plan” means revenue and customers, or conviction and proof. What matters if that you achieve it.
For really early companies, there is generally diminishing marginal expected value after 12-18 months. If you haven’t done something important in 18 months, the 19th month is very unlikely to be any different. And if you’re trying to plan a fundraise, the mere fact of your continued existence won’t move the needle.
Much better to maximize your odds in a short window than extend a perpetually low odds bet for its own sake. Often that will require you to pull forward burn and spend more. And if it’s working, customers will extend your runway through revenue.
The risk of conservatism (at the end of 36 months we have nothing) is much higher than risk of aggression (we burned out after 12). It’s much better to be conclusively right or wrong in a short period of time than spend years to produce a null, inconclusive result.
The point isn’t to last longer; it’s to go further.
Some common objections
When I posted this, I got a TON of pushback. Some of which felt fair… some felt like strawman arguments. I’ll address the common points here.
PFM takes a long time (Lenny told me so)
I very intentionally did not say “find PFM” or “hit a revenue milestone.” You may not find PFM or get to significant revenue in 18 months, but you should still turn over important card in that time. If not, it’s just a bad/hard bet to make (with your time or my money). The point of the the money is to fund rapid experimentation and produce results (positive or negative). And even by dint of the Lenny chart, there are a lot more important milestones before PFM! Hypothesis, product, customers, etc. all count for something.
Few problems are money-soluble. They mostly require insight and focused time.
Cheeky answer: if you don’t have money-soluble problems, you shouldn’t raise money. The possible exception is the really windy road pre-seed - what we call a “FAFO round” where you only raise a little bit and do so with very low expecations. After all, you’re just fuckin’ around. Otherwise, come with insight, ask for money.
This doesn’t work for luxury brands and media companies
Totally right. I also don’t think those are great early bets. Obviously they can work as businesses, but when there’s not a card flip to spend against I don’t think they make for good +EV seed bets.
More startups die from overspending than not.
Sure - I accept that. But the goal isn’t to not die, it’s to Do Things and Win. And while spending recklessly is a bad idea but there is obviously diminishing returns on time after SOME period. Is it definitively 18 months? Maybe not. But it’s not infinite either. Don’t raise more than you can efficiently spend and don’t pass up options to spend well for the sake of runway.
I Wrote
I Read
The Clear and Present Danger of American Law Schools - Cash and Carried
Venture Capital’s ‘Blitzscaling’ Obsession Is Warping the World
This was a book review - not an endorsement.
What Happened to the Hipsters? - Cartoons Hate Her
Abundance
The book is finally out! I’ve been out of town so I only just picked up my copy today. I’ll be back with my review next week.
I’m very excited that there is a wider cultural moment happening around these ideas for building a brighter future. It’s not good enough to say “Orange Man Bad.” Democrats need to present and deliver on a vision that actually improves lives and prosperity. I think Abundance is the best bet to rally around in contrast to the grim, cramped future of Trumpism. More to say soon.