By Oriana Fuentes
Extending the runway is top of mind for every founder in our current environment. Most teams are undergoing layoffs, cutting expenses, and slowing hiring. I bootstrapped my previous startup, Emptor, and had to learn to deploy and allocate capital efficiently to survive and grow.
As a CEO, you wear many hats, but one of the most important ones is making sure your company can continue to operate, which means having enough money in the bank to keep the lights on. Often, this is thought of as the ability to raise capital, not so much how to allocate capital. The latter is becoming more important as VCs issue guidelines to extend runway, in some cases, up to 24 months. The Outsiders by William Thorndike offers insight into exceptional CEOs, not the more colorful, textbook leaders like Jack Welch, but instead those who outperformed based on stock price, i.e., returning value to shareholders. It shares stories of exceptional CEOs as being great capital allocators, effectively using resources as fuel to invest in, acquire, or expand high-value parts of the businesses they run, creating outsized returns to shareholders.
<aside> 💡 How do you use the capital you have to create a lot of long-lasting value? I'm going to share some insights and frameworks we used while bootstrapping, where runway is dependent on the revenue you generate, and every dollar you invest is a bet on producing more value to scale your company.
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Organizational design and hiring the right functions
Why hire? Some teams end up "throwing bodies" at a problem: need more revenue? Hire sales reps. Not growing fast enough? Hire a growth hacker. No PMF? Hire more engineers. No progress? Fire them all and start again. Iterating is important, but poor hiring is expensive, time-consuming, and bad for morale. Most of the leadership should be heavily involved in hiring early on. This means that in human capital dollars, it's one of the most expensive things you can do.
Begin with organizational design. Map out the goals you have and the functions you need to accomplish those goals. Does your existing organization match? Find gaps and excess. It's worth noting that this isn't about titles, it's about functions. Early on, you'll likely have the same person in several functions.
This exercise is a great sanity check for identifying skill gaps, team members with too many hats, and duplicated efforts in the organization.
Leveraging your existing talent
As your company evolves, so does your talent, particularly fast-learning early hires that join startups to supercharge their careers. Jumping to an external hire may overlook a talented insider who is ready for upward or even horizontal mobility. They could be higher impact and better prepared to operate than a new face. Considering internal talent that you've grown is great for morale, retention, and an efficient use of the bright, energetic human capital you've already invested in!
A byproduct of hiring from within is that you can open a more junior role that can be onboarded by your inside person, further motivating your bright team member and making the hiring process leaner from a human capital and management energy perspective.
This was a pretty common phenomenon at Emptor. Over the years, we saw examples such as Operations team members going into Product, Sales, and Talent. A PMO team member covered Product Marketing, and a business development hire became head of legal.
Communicate better, manage less