Cost structure of a startup changes when ambition is staged thoughtfully

Based on experience from fintech investor QED’s portfolio, Fintechjunkie walks through a number of actions and results startups have taken to lower losses or even get to profitability.

I think one of the key points is: “The cost structure of a startup changes when ambition is staged thoughtfully.”

This is why it’s possible for startups (and many large technology companies on the stock exchange) to e.g. layoff large parts of the company and invest less in marketing while still growing revenue (even if slower revenue growth than before).

He also writes “A startup with healthy unit economics growing at 50-75% is more attractive to most Investors than a startup with challenged unit economics growing at 100%+.”

I think the challenge for startups with less than $10 million in revenue growing 50-75% per year is that it needs to be profitable (or very close to) to be a good match for any type of investors. If not profitable venture capitalists see “it’s only growing 50%”, growth investors see “it’s still a pretty small company, let’s wait until it gets to $20 million” and most other investors see “it’s not profitable”.

Author: Henrik Torstensson

Partner at Alliance VC. Investing in Nordic early-stage tech startups.

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