Geoffrey Moore: evaluation

Transcript context

…Got it. So in this bowling alley phase, how do you know you... I know it's not like this binary switch, but that you're ready to move into that versus the early market playbook. Well, I think you get to a point where you realize, "I can't scale my business doing what I've been doing. I mean, I just can't." And if you've taken venture capital, the thing you want to do is, "I don't want to have to raise another..." Well, so understand how venture capital funding works for a second. This is important. A venture capitalist gives you money, and what they're buying from you with this money is, "I want you to use this money to change the state of your company such that when we raise the next round, the next investor will value your company two to three times higher than we're valuing it today." So basically the purpose of this money is to change the value state of your company. If you do anything else with that money, you could have done brilliant things, created amazing demos, hired great people, but if at the end of the day you haven't changed the value state of the company and we have to raise more money, we're going to raise it at the old valuation and I as an investor lose, or even worse, we have a down round and I lose even more. So once you start thinking about that, so we're then Crossing the Chasm. The Crossing the Chasm play is I need to change the state of my company from a cool possibility to what accountants call a going concern. So what is a going concern? A going concern is a company that two years from now you would expect still to be in existence. Why would you do that? Because they have a customer base that's loyal and they have a ecosystem of partners that bring them into new deals and they have established their CAC and LTV, and they've kind of figured out their operating model. And it's not the biggest company in the world. It's somewhere we're now probably in the 10, $20 million, but it's a real company. It's a real company. And that's who you're trying to create when you cross the chasm. And you know you've crossed the chasm when you say, "I don't have to raise any more venture capital. Now, I may want to because I have ambitions to be globally dominant." But you get to raise it on your nickel and on your timeline, not on, "Oh my God, I'm running out of money." So the sooner you can get off with the, "I'm running out..." And particularly last year was fatal to a huge number of companies because that was not how they were thinking about raising funds. They always thought, "Well, there'll be another round, another round, another round." And they were not thinking about changing their valuation state and they're not here. That's a really interesting insight. This idea that you know you've crossed the chasm if you can survive without more venture funding, how do you think about that, the profit element of that? Because it feels like that's the core to being able to survive without venture funding. Is it about making enough money that you can cut and make a profit, or is there some other reason?…

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