The Next Fundable Milestone
Startup Founders, CEOs, Board Members and Investors take note: given a big market, a good team, enabling innovations, and a beachhead - to raise each successive round of capital, focus operations to succeed in the market, and even just simply have a compelling “pitch” for raising venture capital; a startup needs to be run and presented in a very specific way. This way is the practice of running a startup to the Next Fundable Milestone.
No Cash No Company
Startups are growth businesses and business growth requires cash.
The significance of this for a startup is black-and-white. At each stage of a startup’s life, a startup that achieves “something” that attracts more cash lives to fight another day (or more specifically to do this same process again), whereas a startup that does not, ends. This “something” that attracts more funds, is the Next Fundable Milestone
No cash no company. The rest of this article shows that this existential fact is not only is running and presenting a startup to the Next Fundable Milestone essential to success, but it actually makes running it easier and better.
Investors Need It
Any investor that has invested in at least one startup has seen firsthand the stark reality of no cash no company — that stark reality being that with the capital that an investor puts into a startup, that startup either achieves a milestone that attracts more capital (in which case, their investment is either preserved or even increased in value), or their investment becomes worthless.
So at any stage in a startup’s life, in order to attract more cash necessary to keep a startup alive, a startup needs to show prospective investors two fundable milestones:
- The milestone that it just achieved with the previous capital that it had, and
- The next milestone that it will achieve with the capital that it is raising now.
Easier and More Successful
While running a startup to the Next Fundable Milestone appears to be yet another burden for a startup, it actually makes a startup easier to run, more successful and even realizes less dilution.
Running a startup to the Next Fundable Milestone focuses it — and in particular, focuses it on the very items leading to success not just with investors but in their marketplace.
Many startups, for example, just “do stuff”, figuring that merely doing whatever they think is good stuff, will be rewarded with more capital. Not only does this not result in more capital but the startup isn’t nailing what customers or partners want, leaving the startup to fall further and further behind while the market and startups that did run to the Next Fundable Milestone move ahead.
In contrast, running a business to the Next Fundable Milestone focuses a startup on Product Market Fit. Product Market Fit is the rarified set of product features, pricing, targeting, marketing, partnerships and other nuances that win customers. Being on a path of Product Market Fit to more and more customers is what investors need to see to invest in the latest round of a startup — and it is also exactly what a startup needs to succeed in its market.
But this is only the beginning of the wisdom and benefit of running a startup to the Next Fundable Milestone.
For one, running a startup to the Next Fundable Milestone does away with the myriad of other features, ideas and things that a startup would otherwise waste capital and time; decisions are made; and employees have clarity in what they should do.
Running a startup by and to the Next Fundable Milestone also makes its Board functional and useful. With the Next Fundable Milestone, Boards have the means to gauge progress, make well-founded decisions, and avoid distracting tangents, whereas without running to The Next Fundable Milestone, Boards listlessly drift into minutia and fail to act on a path that cumulatively builds success.
Auto-Populated “Pitch”
Given a big market, a good team, enabling innovation, and beachhead in order to invest in your startup, investors need to see that you are turning these things into a continuously fundable business. That is, fundable milestones — the milestone that the startup just achieved with the capital that it had; the next fundable milestone that it is set up to achieve with the capital that it is raising now, and the mindset to make it happen.
For startups that fail to run their business to the Next Fundable Milestone, they find themselves frustrated and bewildered as to why investors aren’t responding favorably to their otherwise appearing story.
In contrast, startups that run their business to the Next Fundable Milestone find that their “pitch” is automatically populated by what they just did and already plan to do in the future.
Furthermore, the more that you can show investors that your startup is being run to achieve Next Fundable Milestones, the more likely that investment will occur at a higher valuation.
A Call to Action for Startup Board Members, Investors and CEOs
For ten plus-year period ending by early 2022, startups and their Boards and Investors were taught that they could raise additional capital without practices fundamental to the success of a business.
Not only was this eschewing of fundamental business practices needlessly dooming many startups to failure, but, save for a rarefied few deep Artificial Intelligence startups today, the easy money that startups have learned to count on, is no longer there.
If the startup that you are involved with cannot either show in a single sparse slide or say in a single brief sentence, what fundable milestone your startup is being run to achieve with the capital and resources that it presently has, then your startup doesn’t have a Next Fundable Milestone, isn’t being run to achieve the Next Fundable Milestone, and all but certainly will be incapable of raising additional capital.
The loss of fundamental business practices inculcated into the culture of startups for the past decade still lingers, and so the task falls on Board members, investors and CEOs to (re)instil and then maintain the practice of running a startup to the Next Fundable Milestone.
J. Neil Weintraut is a Venture Capitalist at Motus Ventures, a Venture Capital firm focused on deep technologies in autonomy, green energy, quantum computing and space. Motus’ investments include Argus Cybersecurity, Elroy Air, EVConnect, Ghost Robotics, Helm.ai, H2U Technologies, Infinitum Electric, Memryx, Metawave, OrbitFab, Qunnect, and Sonatus. Prior to Motus Ventures, Neil co-founded the Internet-focused Venture Capital Firm, Palo Alto Venture Partners, achieving numerous exits including AdForce, AvantGo, CareerBuilder, DemandForce, Vicinity and When.com, and served on the Board of numerous Venture Capital-backed startups. Neil was a Managing Director at Technology Investment Bank Hambrecht & Quist where he was one of the first Wall Street Internet Research Analyst, taking public more than 15 Internet companies, and publishing research on more than 200 Technology companies. Neil has an MBA from The Wharton School of Business and a BSEE from Drexel University. Neil has been an invited presenter on Technology companies at Harvard Business School, Stanford University, UC Berkeley, and other major Universities. Neil has been on the Advisory Boards of the MIT / Stanford Venture Lab (VLAB), and OpNet, an economic development group helping underprivileged residents of San Francisco achieve economic independence through technology. Neil was also the advisor to the International Olympic Committee on the application of the Internet to the Olympic Games.
