The Startup Treadmill

going-nowhere-fasterDo you know why startups fail? Because they run out of money. Yes, there are lots of root causes: wrong market, timing, team, product, execution. But you can get past these sins and keep fighting as long as you have cash.

Ironically, the reason why startups run out of money is because they raise capital too early. And they raise the wrong kind of capital too early.

As soon as you raise institutional capital of any kind you get on a treadmill where the VCs want you to run harder and burn faster. They want you to use their capital to accelerate – spend, hiring, marketing and ultimately growth. Acceleration is of course why you raise money and give up part of your company in the first place. But premature efforts to accelerate usually don’t work.

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Operation ‘Hire a VC’

A year ago today I started full time at FreshBooks, completing my transition out of VC. People often ask me if I miss it. The short answer is ‘no’. It’s been a great move for me on every dimension.

I was so positive my transition that a few months back I rescued another VC, hiring Russell Samuels away from Mantella Partners to come join our biz dev and corp dev team.  This has also gone really well. Russell is a happy camper and is kicking ass!

On the strength of these two moves, I realized that we need more of this. We need to rescue VCs and bring them back from the dark side. So, today, I am pleased to announce Operation Hire a VC. It’s a simple program really. Starting today, FreshBooks will give preference in all its current and future job openings to any applicants that have a VC background. The more experienced the better. We think General Partners bring a wealth of smarts and connections that can be applied to almost any role.

If you’re a VC and need rescuing, check out our careers page. And if you’re an employer and agree with me that VCs would make great team members then come join the cause and implement Operation Hire a VC at your company!


Conviction: This is a word we use a lot at FreshBooks. Why? Well, not because we like to hire ex-convicts, but because we are building a company for the long term and want to be a long term leader in our market.

When you look at the World through that lens it clarifies things.  You realize first of all how difficult it is to build an enduring market-leading technology company. CB Insights published some stats last week telling us that 2 out of 3 tech exits last year were startups selling at Series A or earlier. That’s just the companies that even get to exit. If you lump in outright failures on top then what you realize is very few companies get past series A and become true growth stage companies. Even fewer become profitable, stand alone market leaders.

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Two keys to building a massive SMB startup

Late last year, I wrote about SMB being the “third market” for VCs. Lots of VCs fund consumer startups. Lots fund enterprise startups. Very few truly target startups serving the small business market. Why?

The challenge and opportunity for startups targeting SMB is customer acquisition: there are 30 million small businesses in the US alone; 60M in the English-speaking World. Moreover, SMB is an evergreen market – more and more businesses start each year, more than replacing those that die. So, lots of customers, but historically they have been hard and costly to reach.

As such, VCs tend to be skeptical about a startup’s ability to acquire customers profitably. This concern has two vectors: customer acquisition cost & customer lifetime value. This last point is related to churn – the rate at which your customers cancel their accounts. Enterprise startups keep their customers for many years. And each customer is worth a lot. SMB startups keep customers for a much shorter period of time. And each customer is worth relatively little.

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