Many startups scale revenue based on VC expectations or by mimicking fast-growing companies like Snowflake, rather than using internal business signals. This inappropriate timing and pacing, often triggered by a capital infusion, leads to a high, unnecessary failure rate.
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A huge Series A before clear product-market fit creates immense pressure to scale prematurely. This can force 'unnatural acts' and unrealistic expectations, potentially leading the company to implode. It challenges the 'more money is always better' mindset at the early stages.
A key differentiator for companies that scale successfully is their focus. Failing companies obsess over and incentivize leading indicators like MQL volume. Successful ones use them only as directional guides while remaining fixated on lagging indicators like revenue.
In the run-up to its IPO, Snowflake slowed hiring to optimize for profitability. This caused the sales team to focus on easier upsells from existing accounts (with 177% net retention) instead of new business. As a result, they neglected new logo acquisition for two years, hurting long-term growth.
Lin warns that much of today's AI revenue is 'experimental,' where customers test solutions without long-term commitment. He calls annualizing this pilot revenue 'a joke.' He advises founders to prioritize slower, high-quality, high-retention revenue over fast, low-quality growth that will eventually churn.
Investors like Stacy Brown-Philpot and Aileen Lee now expect founders to demonstrate a clear, rapid path to massive scale early on. The old assumption that the next funding round would solve for scalability is gone; proof is required upfront.
The narrative of "0 to $100M in a year" often reflects a startup's dependence on a larger, fast-growing customer (like an AI foundation model company) rather than intrinsic product superiority. This growth is a market anomaly, similar to COVID testing labs, and can vanish as quickly as it appeared when competition normalizes prices and demand shifts.
Rapidly scaling companies can have fantastic unit economics but face constant insolvency risk. The cash required for advance hiring and inventory means you're perpetually on the edge of collapse, even while growing revenue by triple digits. You are going out of business every day.
The industry glorifies aggressive revenue growth, but scaling an unprofitable model is a trap. If a business isn't profitable at $1 million, it will only amplify its losses at $5 million. Sustainable growth requires a strong financial foundation and a focus on the bottom line, not just the top.
Many founders believe growing top-line revenue will solve their bottom-line profit issues. However, if the underlying business model is unprofitable, scaling revenue simply scales the losses. The focus should be on fixing profitability at the current size before pursuing growth.
Founders mistakenly believe large funding rounds create market pull. Instead, raise minimally to survive until you find a 'wave' or 'dam.' Once demand is so strong you can't keep up with demo requests, then raise a large round to scale operations and capture the opportunity.
