Do you remember the classic Smith Barney ad campaign starring John Houseman? Let me set the stage: an old British man in a bow-tie, eating a soft boiled egg on fine china, while ranting about hard work and the “old fashioned way” of earning money. It is burned in my memory. I have been thinking about this a lot lately as we develop our business at Narrative Science, and feel compelled to remind other entrepreneurs not to get sucked into all of the hype around insane valuations and fundraising efforts that bring in hundreds of millions of dollars. There is really no escaping the simple fact of building a business: you have to deliver on a sustainable business model, and that takes hard work.
“They make money the old fashioned way…they EARN it.”
It’s become a daily routine. We wake up, see another headline of the latest tech company to raise hundreds of millions of dollars at a huge valuation, and we’re left scratching our heads in wonderment. How do these companies receive such valuations when they have little revenue and little proof that they can sustain their operating expense?
For tech entrepreneurs, it leads us to question whether we’re doing the right things for our own business.
It is easy to daydream of the fun it would be to have a cash pile that allows you to provide employees free on-site yoga classes and massages. And, what about daily free lunch and an all-you-can-eat style snack bin? Your employees would revere you!
My advice; don’t get sucked into this trap. I’m not hating the player, or even the game for that matter. If you can raise hundreds of millions of dollars, by all means, do it. I’m focused on the principles of building a sustainable business. One that provides true value to customers and partners. One that can sustain itself for the long-term. One that takes time and hard work.
Our recent focus has been on evolving from a start-up to a growth company. Growth companies have proven their market fit, they have customers that are seeing tremendous value, they have a business model that is proving to create sustainability, and they leverage their investor dollars prudently. This is not to say that you withhold investment, quite the contrary. Invest to accelerate growth, but don’t be foolish.
A few things that are constants in life and in business:
- Businesses ebb and flow. Don’t let the high highs or the low lows over-influence you in any one direction.
- Sales momentum is a force multiplier. Yes, product is what drives a tech business for long-term sustainability. However, there is nothing that replaces the excitement of accelerating sales growth. This is what ignites a business.
- All great companies comprise the same formula: motivated people with strong values and good, old fashioned, hard work.
In life, nothing is certain but death and taxes. In business, it’s a certainty that sales accelerating at a faster rate than expense is a path to success. So as you read the next press release of some record fundraising round, don’t lose focus on the things that matter. And in the words of Flavor Flav, “Don’t believe the hype!”