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When startups should say no to revenue

TechBrunchBy TechBrunchMay 3, 20242 Mins Read
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When you're an early-stage startup, you're looking for customers. The metric that investors look at is how fast revenue is growing between the seed and A rounds, so it's essential to start generating revenue as soon as possible.

If you're not making a lot of money, you'll probably have a hard time raising your next round of funding. Alex Kayyal, partner at Lightspeed Venture Partners, speaking at his TechCrunch Early Stage in Boston last week, said finding the right early partners is key.

One problem that sometimes comes up for early-stage companies is a single large customer. Although this company is large and influential, it doesn't build its products to fit one company's needs. To really jump-start your revenue machine, you need to address a wide range of use cases.

“I think one of the hardest things as a startup is saying no to revenue and having a customer willing to say, 'I'll write you a check for $200,000 for your product,'” Kayyal says. he said. This is especially true if the check is much larger than the next closest customer. But at the same time, you don't want to become an outsourced development factory for one company. This is very dangerous in the phenomenon of one large customer.

The problem with some big customers is that they have the power to throw their weight around. “You know in Walmart retail you always see a situation where they can dictate the terms. “It depends,” he said.

It's tempting to get paid to run a business, but startups can't afford to take on customers at the expense of other customers. Therefore, sometimes saying no and actually knowing when is the right time to cooperate with such companies is an important skill for young companies.

“It can lead to a slippery slope where code customization and feature building is done just for them, and unfortunately, it's not representative of the rest of the market,” Kayyal says. . “Your real goal is product-market fit that is repeatable across industries, not just a single customer.”



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