Why we rather have simple dinners than scale too fast with investor money

I sometimes envy fellow entrepreneurs who have successfully raised millions of dollars to expand their business because finally, they and their team can now afford proper dinners with a normal salary.

But having been a country head with P&L and headcount responsibilities, I also understand the risk and hazard of having a large budget and an ambitious plan.

Risk of a large headcount

In a corporate situation, the budget is ALWAYS dictated from top down. There is a global revenue target for the year. After some political struggle among the head of regions, the total target is carved into regional targets, then country target, and so on.

I have firsthand experience in one of my corporate roles. I was handed down a budget that called for hiring 50 more people. But by the end of the year, I was actually firing 50 people. The plan was simple but not achievable when all competitors were also hiring top talent in the same space. But when politics changed, it was easy to point fingers and flip the plan over.

It was an unpleasant experience for all.

Unicorn hunt

In a startup situation, the founder decides his own revenue target and the corresponding headcount to achieve it. But there is danger in a prevailing startup mentality that tells founders they need to boast big in order to make investors interested. Many investors say they expect most of their investments to fail, so they will only invest in startups with a very big vision. They will only invest in the next unicorn.

That is why most startups are forced to paint an overly rosy picture in their pitch decks and business plans. Otherwise, they won’t even have a chance to meet the investors.

The risk is that when the money is in the bank, you are immediately forced to meet the large headcount in your ambitious business plan. Then, you lose the flexibility.

Stay lean and focused

Around the time of the soft launch of our startup, PikaPage, I became increasingly frustrated with preparing rosy pitches and business plans, chasing investor feedback, and negotiating valuation. (PikaPage is an app people can use to publish easy-to-read event data on smartphones.)

We were also sending out cold emails to some of our potential customers. One responded and it didn’t take too long for them to commit to pay for our product.

It suddenly dawned on me that it is much easier to find customers—customers who will pay by just looking at the product and how it solves their problem.

So, one Sunday afternoon, I decided to pull the plug. I decided to focus my time on customers instead. It was so much more satisfying because every time we talked to a customer, we learned something new. We used our learning to improve our product.