As we start 2025, we wanted to provide founders with a few thoughts for the year ahead. The global venture capital ecosystem continued to experience a downturn, and business has been difficult, with startups closing, fundraising elusive and the world more volatile than before. However, the second half of the year brought some optimistic indicators, with an increase in total funding vs the prior year (primarily led by AI), and this could set the stage for 2025 to be a year of regained momentum across many areas (not just AI).
A lot has been written about “founder first”, “founder friendly”, and “founder mode” in the past months, so we’d like to offer a bit of a contrarian view on this. We look at much of these discussions as self interest by the folks who peddle them. Building companies, at its core, has not changed. You need great management optimized at each stage of a company’s lifecycle, coupled with solid plans, a willing market, great products and some luck. The more things change, the more they stay the same.
What “Founder-First” / “Founder Friendly” means to us:
Many, if not most early stage investors believe that the Team trumps everything else, and they decide on an investment based solely on the team. This makes for great marketing by these investors and with that the misaligned slogan that they are “Founder First” or “Founder Friendly”.
Our view, at Entrée Capital, is a bit more nuanced. It’s about the combination of the Team and the proposition it presents, which means the potential of the opportunity. This becomes more skewed towards the “opportunity” at later stages, where real metrics, market sizes etc count. Hence the Entrée formula, where each “T” has a natural weighting (addition, multiplication or exponent):
In the ordinary lifecycle of a business, these “T”’s change. Sometimes, some of the Team (founders) may leave and professional CxO’s are brought in, at times Technology becomes more relevant (i.e. Product), and so on. And so, when founders consider their company, and their role within that, they should always subscribe to the idea that “Form follows Function”. The best founders focus on the results of their company and their people, and they morph over time — the successful ones build great businesses that they continue to lead.
For us, being “Founder Friendly” means telling it like it is, being able to debate (and at times disagree on) key challenges and being honest and transparent rather than telling a founder what they want to hear. In this context, it includes being there to understand and helping by providing mentorship and support as more investors, team members and partners join along the way.
Remember that, as a founder, your role, and ours as an investor, is to always put the company first – as both our fates are inextricably linked.
Some tips for the year ahead:
- 🎯 Focus, focus and…focus: Focus on your startup’s core strengths and value proposition. Streamline operations to boost efficiency and allocate resources to areas with the highest impact. Do more with less. The next financing round is not obvious and will take longer to raise, if at all..
- 🤝 The ABC (Always Be Closing) rule: One of our fundamental rules. Close new revenues, no matter what — compromise on pricing to get deals through the door and use a ‘land and expand’ approach.
- 👀 Keep your eyes on the numbers: Financial discipline is critical. Regularly revisit your budget and projections to align with your runway goals. Focus on key metrics like burn rate, revenue growth, and customer acquisition costs. Track these metrics diligently to identify trends and make timely adjustments. Remember, data-driven decisions are your best ally in navigating uncertain times.
- ⨑ Form follows Function: Figure out the best solution and then how you build around that, rather than starting with people or product and trying to fit those to meet some narrative.
- 🤖 AI in the box: Everything you do in your product needs to be AI-enabled (if possible). Don’t wait for these innovations. Think ahead. The same applies to your business. AI-everything! SDR — start using AI, Support- start using AI… you get the point.
We believe that 2025 is going to be a successful year for those who understand how to create and leverage their startup, team, product and market. Challenges will always be present, but the resilience and passion to shape a better future are what will make you as a founder thrive.
Have a great new year!
