Bedrock to Breakaway

There's some really encouraging funding news this week. Good Eggs announced a new $50 million venture financing on Tuesday, led by Benchmark with many existing investors participating alongside. This new capital comes almost three years after the company wound down its daily operations in every major U.S. city with a skeleton team at its  San Francisco HQ. Its impressive to learn that Good Eggs has persevered since that downsizing and earned fresh financing to continue to build and evolve. What I found most meaningful was this soundbite: 

"We spent the first eight months of 2016 solely focused on bedrock foundation, so the board didn't have a single conversation about growth." - CEO Bentley Hall

As it relates to a quote from the 2015 news that Good Eggs was shuttering the majority of its operations:

"The single biggest mistake we made was growing too quickly, to multiple cities, before fully figuring out the challenges of building an entirely new food supply chain." - Co-Founder, Former CEO Rob Spiro

Once a startup goes to market, often raising successive venture rounds, there's tacit acknowledgement that its foundation is sound. Fundraising pitches and board meetings generally focus on plans and potential to grow from where a company is, not how it got there. There's a reason for this point of view. Growth is important. Its speed and velocity can mean the difference between failure and success. Even outside of the startup-vc industry this holds true. Aside from shorting, no one buys a stock that they don't expect to go up at some point. The advantages that accompany breakaway growth are many and as a result its highly sought after. Investors, expected to get a jump on next big things, search endlessly for an inkling of a future exponential growth curve. The attraction to an 'up-and-to-the-right' trajectory can become toxic when maintaining it obscures the realities of a given market or business model. As a cool new startup gets more media coverage and ever-larger rounds of investment, zealous enthusiasm can quickly become unrealistic expectation. With the buzz that our industry is capable of spinning up, that expectation can weigh heavily on a startup eager to deliver breakaway KPIs at every update, whether that's an internal all-hands, a board meeting, or a fundraising announcement. 

The pressure to achieve maximum growth at any cost can have lasting, detrimental effects. It can compromise a company with a sound foundation if that company isn't yet structured to support a deluge of new market expansion. It can also artificially prop up a company with a weak foundation and give it the temporary appearance of outlier success, like how steroids work. In the event that a startup has cash stockpiles, these consequences may not become obvious immediately. Yet both create unsustainable scenarios in which clear execution in market becomes increasingly difficult. When the foundation goes, the wheels tend to come off. So, breakaway growth can effect break apart growth pressure. 

I don't know the details of the Good Eggs story past or present and even with fresh funding their future remains to be seen. I do know it took being blasted through a gauntlet of growth expectation and nearly failing in the effort to deliver for Good Eggs to have to pause, reflect, and plan clearly. So many startups, similarly run ragged, aren't afforded a second act. Although there is a time when anyone can gather market intelligence, build models, stress-test assumptions, and layout strategy, structure, process, and plan for what's to be built and how it'll succeed in market: before starting up. Don't get me wrong, there's nothing more interesting and exciting then thinking about a new product, what will it do? what will it look like? how will I experience it? how amazing is it going to be? But just as crucial to creating this new thing you want to create is taking the time to establish a durable, intelligent, agreed-upon plan for pragmatic building towards sustainable growth. The decision to start a company is never made lightly. By laying down a bedrock, foundational plan for their startup before incorporating, every imminent entrepreneur can navigate the chaos with extra clarity and confidence thereafter. 

Tim DevaneComment