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SCUBA Diving and Seed Money are More Connected Than You Think

SCUBA Diving and Seed Money are More Connected Than You Think
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This story appears in the October 2015 issue of Entrepreneur. Subscribe »

One of the venture funds I work with specializes in seed investments: early-stage deals that are often made with young, bright, first-time entrepreneurs who’ve been working hard to get the chance to build their dream company. After enduring a tough diligence process, they couldn’t be more excited to nab some funding and start working. Or so you’d think. Fact is, so much effort goes into scoring the money that when the dust settles, some entrepreneurs don’t know what happens next.  

When it comes to guiding entrepreneurs through this transition, I like to use the analogy of a scuba tank. For pre-revenue companies, starting out is like working
underwater at progressively deeper depths. There is a balance between getting as much done as quickly as you can and knowing the right time to go up for more air. The key is learning what to do to ensure there is another tank (a new funding round or other capital raise) waiting for you when you head back up to the surface.

That’s where key performance indicators come in. We identify KPIs with all our early-stage founders to help them focus on a few core metrics that matter in their industry. KPIs vary greatly based on the company, but common ones include number of new users, customer retention and monthly recurring revenue. 

A note of caution: KPIs need to be handled with care. There is no bigger buzz kill for newly funded entrepreneurs than to turn their vision and creativity into numbers and tracking. After all, we fund these folks because they take chances and think big. 

Great teams of investors and entrepreneurs find ways to make this work. Instead of pitching KPIs like an accounting burden that could drag their company to the bottom of the sea, we challenge our founders to not just meet their numbers, but to blow past them. This buys them credibility and time to try new things while they juggle everything from hiring a team to building and marketing their product.   

If the company is growing like crazy, there’s almost nothing an entrepreneur can’t try in the effort to build out his or her vision. If it’s stalled, then they know it’s time to come up for a new tank of air.

All entrepreneurs (even the legendary ones) are constrained by the size of their air tank at the beginning of a venture. When they run out of air, they drown (lose everything), come up for a new tank (raise more funding) or get out of the water (pivot to something new). The key for my neophyte entrepreneurs is to realize that it’ll take many dives—and tanks—to get all the work done.

Edition: October 2016

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