“Doing more”

I regularly meet startup founders who are raising venture capital. When I ask why they’re raising venture capital, many answer that their goal is to grow, and they need capital so they can “do more”, like “build out the team” and “expand marketing”. Investors often do the same thing. VCs regularly encourage founders to “run more experiments” or “hire more engineers” in pursuit of growth. It’s essentially the same prescription: “do more”.

Here’s the problem. “Do more” tells you nothing about the relationship between action and output. We can all literally do more at any given moment. But to what end? Shouting at the sky won’t make it rain, so why do we assume “doing more” will cause a business to grow?

I’ve done it too. When I was a first-time CEO, I agonized over all the things we weren’t doing as a company. We weren’t building a sales team. We weren’t doing content marketing. We weren’t automating all the things. In hindsight, these were distractions. Our real problem was that our customers didn’t value our product. We weren’t solving a big enough problem for them. Until we solved that, we weren’t going to grow. But while I knew that intellectually, I still pushed my team to “do more”, hoping that if we did more for long enough, we’d stumble into something that worked. I was shouting at the sky, trying to make it rain.

Instead of actions, I think we should focus on constraints. For a SaaS company with product-market fit and a healthy stream of high quality leads, often the biggest constraint on growth is the number of productive sales reps the company has. This is why you often see growth-stage SaaS companies raising large amounts of venture capital in a run-up to an IPO. They can turn that money into more sales reps, which reliably turns into more revenue. In effect, these companies are using venture capital as a time machine; they’re compressing the timeline to growth via the addition of more sales reps. 

The same works in reverse. Until a company can reliably produce growth, it either (a) hasn’t correctly identified its constraints on growth, (b) cannot solve for those constraints, and/or (c) is constrained by the size of its market. An example of (a) and (b) would be an early-stage company pre-product market fit. An example of (c) would be the local bowling alley in a rural town. In each case, simply “doing more” won’t help.