I just read this on a blog post from Joe Fernandez, founder of Klout:
Startups now live in a world of spectacular growth at all costs. All the founders I spoke to this week had stories of over hiring, breaking the budget on marketing, focusing on cheap virals rather than building real utility and every other unnatural act that might help them ride the hype cycle a little longer. The shortsightedness that plagues the public market has now infected startups.
That’s all wrong, and it’s not what we’re about here at Forward Investment Partners. We are, of course, as keen on growth as the next investor, it’s the biggest driver of value in startups, but it should be sustainable growth. Anything else is just storing up problems for the future. I understand that growing any way possible to raise money and buy time to figure things out properly can be tempting, but it’s a dangerous path because to keep moving forward you then have to grow further from an artificially inflated base and you stand every chance of ending up in the situation Joe describes.
Sometimes it’s better to take things a little slower. I was with a company today that is now budgeting for no growth until next year whilst they focus on hiring and improving their product. I probed hard on this but ended up agreeing that it was the right thing to do because they are staying connected to what their customers need and that will deliver better returns to us all in the long run.