Fred Wilson: Maximizing Runway Can Minimize Success
Runway is the amount of time you have until you run out of cash. Or until you raise another round. Or until you can get the business self sustaining/profitable. Runway is survival. And so everyone in the start-up world is obsessed about runway.
And yet, if you wanted to make your runway as long as possible you would raise as much cash as you could and/or you would keep your expenses as low as possible. I have seen teams do both and you know what? Neither works too well.
The fact is that the amount of money start-ups raise in their seed and Series A rounds is inversely correlated with success. Yes, I mean that. Less money raised leads to more success. That is the data I stare at all the time. It makes little sense at face value but it is true based on more than two decades of experience in the start-up world.
Keeping your team lean does work and I advocate for that all the time. Tumblr went for close to two years on a two person team. But those are two special people. Most start-up teams can't do that. Most start-ups need to hire at least a half dozen people or more to get a product out the door and then iterate on it, scale it, and make it work. And that costs money.
To my mind, maximizing runway is not the game start-ups should be playing. Getting somewhere fast is the game they should be playing. You can always raise more money if you are doing well on the metrics that matter in your business. So focus on that and runway will take care of itself.
If you can get the plane to take off, the length of the runway matters less. If you can't, there is no runway long enough for you.
This post originally appeared on Fred Wilson's blog, A VC.