🔍 Crucial Lessons from a VC Portfolio Failure: A Story of Mistakes and Growth
🖥 In the high-stakes world of venture capital, our failures often teach us more than our successes. Recently, Sammy Abdullah from Blossom Street Ventures shared a candid analysis of their investment in Take The Interview, a portfolio company that ultimately failed. This story offers invaluable insights for all of us in the VC community.
➡️ The tale begins with a critical oversight: cash inefficiency. When Blossom Street invested, the company was burning through $170k monthly while only generating $60k in MRR. That's a staggering burn rate of nearly $3 for every $1 of revenue. Today, Abdullah admits they wouldn't even consider a company burning more than $0.50 for every $1 of MRR. It's a stark reminder that sustainable growth should always trump rapid cash burn.
➡️ As the story unfolded, churn became a significant issue. Net dollar retention fell from a healthy 100%+ to a concerning 85%+. Instead of looking inward and addressing potential problems with their product or processes, the company fell into the trap of blaming external factors. This misstep highlights the crucial need for constant self-assessment and the willingness to pivot when necessary.
👀 Perhaps one of the most painful lessons came from the company's reluctance to make necessary layoffs. In an attempt to preserve culture, they tried to "grow out of the burn" instead of cutting expenses. It's a poignant reminder that there's no culture to preserve if the company doesn't survive. Sometimes, tough decisions need to be made early to ensure long-term viability.
➡️ The departure of a cofounder should have been a wake-up call, but the board didn't dig deep enough into the underlying issues. This oversight underscores the importance of treating major events as opportunities for thorough reevaluation. As VCs, we need to implement regular, honest assessments of our portfolio companies' direction and leadership.
➡️ In a last-ditch effort, the struggling company merged with a similarly weak peer. Predictably, this move failed to solve the underlying issues. It serves as a stark reminder that recognizing when to cut losses is a crucial skill in our industry. Sometimes, the best solution might be an orderly wind-down or sale of assets rather than prolonging the inevitable.
🛡 These experiences underscore the critical importance of rigorous financial discipline, constant self-assessment, swift action in the face of challenges, and thorough board oversight. As we move forward in our investment journeys, let's carry these lessons with us. They serve as a reminder that in the world of startups and VC, complacency is the enemy of success.
❓ What lessons have you learned from your portfolio failures? Share your experiences, and let's continue this valuable discussion. After all, it's through open dialogue and shared wisdom that we all grow stronger in this challenging yet rewarding field.
🔗 Source #VentureInside
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🖥 In the high-stakes world of venture capital, our failures often teach us more than our successes. Recently, Sammy Abdullah from Blossom Street Ventures shared a candid analysis of their investment in Take The Interview, a portfolio company that ultimately failed. This story offers invaluable insights for all of us in the VC community.
➡️ The tale begins with a critical oversight: cash inefficiency. When Blossom Street invested, the company was burning through $170k monthly while only generating $60k in MRR. That's a staggering burn rate of nearly $3 for every $1 of revenue. Today, Abdullah admits they wouldn't even consider a company burning more than $0.50 for every $1 of MRR. It's a stark reminder that sustainable growth should always trump rapid cash burn.
➡️ As the story unfolded, churn became a significant issue. Net dollar retention fell from a healthy 100%+ to a concerning 85%+. Instead of looking inward and addressing potential problems with their product or processes, the company fell into the trap of blaming external factors. This misstep highlights the crucial need for constant self-assessment and the willingness to pivot when necessary.
👀 Perhaps one of the most painful lessons came from the company's reluctance to make necessary layoffs. In an attempt to preserve culture, they tried to "grow out of the burn" instead of cutting expenses. It's a poignant reminder that there's no culture to preserve if the company doesn't survive. Sometimes, tough decisions need to be made early to ensure long-term viability.
➡️ The departure of a cofounder should have been a wake-up call, but the board didn't dig deep enough into the underlying issues. This oversight underscores the importance of treating major events as opportunities for thorough reevaluation. As VCs, we need to implement regular, honest assessments of our portfolio companies' direction and leadership.
➡️ In a last-ditch effort, the struggling company merged with a similarly weak peer. Predictably, this move failed to solve the underlying issues. It serves as a stark reminder that recognizing when to cut losses is a crucial skill in our industry. Sometimes, the best solution might be an orderly wind-down or sale of assets rather than prolonging the inevitable.
🛡 These experiences underscore the critical importance of rigorous financial discipline, constant self-assessment, swift action in the face of challenges, and thorough board oversight. As we move forward in our investment journeys, let's carry these lessons with us. They serve as a reminder that in the world of startups and VC, complacency is the enemy of success.
Fellow VCs, our role isn't just to provide capital, but to be active partners in building sustainable, successful businesses. Let's use these insights to sharpen our investment theses and guide our portfolio companies towards better outcomes.
❓ What lessons have you learned from your portfolio failures? Share your experiences, and let's continue this valuable discussion. After all, it's through open dialogue and shared wisdom that we all grow stronger in this challenging yet rewarding field.
🔗 Source #VentureInside
🛡 Powered by V3V Ventures