Is your business scalable or just fundable?
As an emerging company, you’re likely no stranger to the world of fundraising. It’s a necessary evil, after all – who doesn’t want to grow their business and achieve their goals? But as you chase funding, it’s essential to take a step back and ask yourself: is your business truly scalable, or are you just fundable?
Funding can be a double-edged sword. On the one hand, it provides the necessary resources to take your business to the next level. On the other hand, it can also fuel inefficiencies, misdirection, and even stagnation. The truth is, funding only amplifies what’s already working or broken. It doesn’t create a scalable business model out of thin air.
So, what does it mean for a business to be scalable? In short, it means that your company can grow and increase revenue without being held back by inefficiencies, bottlenecks, or other constraints. Scalability is about building a strong unit model, clear differentiation, and solving a real problem. It’s about creating a business that can thrive, even as you add more customers, employees, and resources.
On the other hand, fundability is a different story altogether. A fundable business is one that has a good story, a compelling pitch, and a clear need for capital. But fundability doesn’t necessarily translate to scalability. In fact, many businesses can raise funding despite being fundamentally flawed or unsustainable.
So, why do so many emerging companies chase funding as validation? There are a few reasons for this. For one, fundraising can be addictive. The rush of adrenaline that comes with closing a deal can be intoxicating, and it’s easy to get caught up in the excitement of it all. Additionally, fundraising can be a way to get attention, recognition, and validation for your business. It can be a way to prove to yourself, your team, and the world that your idea is viable and worth pursuing.
But here’s the thing: fundraising only amplifies what’s already working or broken. It doesn’t create a scalable business model out of thin air. If your business is fundamentally flawed or unsustainable, raising funding won’t magically fix those problems. In fact, it could even make things worse by perpetuating inefficiencies and misdirection.
So, what can you do to build a scalable business? Here are a few key strategies to keep in mind:
- Focus on unit economics: What are the costs and revenues associated with each individual customer or user? Are you profitable at the unit level, or are you hemorrhaging money? Focusing on unit economics will help you identify areas for improvement and optimize your business for scalability.
- Build a strong unit model: What is your business model, and how does it work? Is it based on a clear and sustainable value proposition, or is it a hodgepodge of unproven assumptions? Building a strong unit model will help you identify areas for improvement and create a foundation for scalability.
- Create clear differentiation: What sets your business apart from the competition? Is it a unique value proposition, a proprietary technology, or a particular way of working? Creating clear differentiation will help you stand out in a crowded market and attract the right customers.
- Solve a real problem: What problem are you solving for your customers, and is it a real and pressing need? Solving a real problem will help you create a loyal customer base and drive revenue growth.
- Monitor and measure: How are you tracking your progress, and what metrics are you using to measure success? Monitoring and measuring will help you identify areas for improvement and optimize your business for scalability.
In conclusion, the distinction between a scalable and a fundable business is an important one. While fundraising can be a necessary step for many emerging companies, it’s not a guarantee of success. In fact, many businesses can raise funding despite being fundamentally flawed or unsustainable.
To build a scalable business, you need to focus on building a strong unit model, creating clear differentiation, solving a real problem, and monitoring and measuring your progress. Money can fuel the engine, but the engine needs to be efficient first. Scale follows structure.
Source: https://www.growthjockey.com/blogs/emerging-companies
