How to become a unicorn in a field of horses

The CEOs of three leading tech unicorns discuss how founders can take their companies to new heights.

In the current environment, many startups are worried about investment drying up. But with many storms to weather, is there a best approach for those looking to scale?

Playing (company) board games

“The best advice I got was to treat a board member like a co-founder,” said Edith Harbaugh, CEO of the unicorn LaunchDarkly. She went on to explain: “A lot of future funding rounds come from your current funders, due to pro-rata. So you always want to make sure you’re building that relationship, and there’s somebody that you trust who will help you succeed”.

Eynat Guez, CEO of another unicorn, Papaya Global, was more wary of boards and investors: “The best advice I can give to anyone is to choose advisors that will trust you to lead the company, and will not force you to execute what they feel that you should do. Because, in reality, investors are investors, founders are founders, and it’s a very different role.”

Re-aligning for healthier operations

Edith and Eynat agreed that startups should try to run purpose-driven, lean operations. That may seem obvious but, in the bountiful fundraising environment of recent years, it became very easy for emerging companies to slip into an unsustainable financial situation, relying predominantly on investor’s funding to build market share.

“We all understand cash is becoming much more expensive than it used to be,” said Eynat. “As founders, we heard things [from investors] – ‘grow quicker’, ‘spend more’ and so on”.

In a recession, which looks increasingly likely, there is an opportunity for startups to get back to basics. This essentially means a healthy balance-sheet, with solid revenue and economised expenses.

Image of Christina Cacioppo, CEO of Vanta, at Collision 2022: Harry Murphy/Web Summit (CC BY 2.0)

Focusing on core business

Raising funds to keep a company going may be more of a challenge now than many founders are used to. This could be a mixed blessing for startups.

“My only advice would be to really focus on the core business. From talking to my startup friends, if you’re a good company, you will get funding. But it might take you a little bit longer,” said Edith.

Eynat bluntly put it that “fundraising is not the target of the business. The business is the target of the business”. Rather than focus on inflated valuations, founders need to focus on their product and their employees.

Making intros, intros, intros

It’s relatively simple to schedule meetings with potential investors, but how do you make them count? Vanta co-founder and CEO Christina Cacioppo has a background in venture capital. Has attended these meetings from both sides, Christina has one key piece of advice: “The easiest-to-implement trick that surprisingly works? If you want to get a warm intro to a VC, do that, but actually get five intros to the VC.”

Christina elaborated: “You would see one [introduction] come in, and the partner would say ‘Yeah, I trust this person’, and they’ll take the meeting. But then if you have two or three more people pinging the partner, then they’ll say ‘Whoa, wait. People really like this company’. Then if you get a fourth or fifth person to ping the partner, they’ll say ‘This must be the next Google. Gotta meet this company’.”

Charging up front, if you can

Christina also had advice for navigating cash flow concerns in the early days, explaining that Vanta would always try to charge the annual fee up front as soon as customers had signed their contracts: “What that let us do is basically work in cash flow break-even, all the way through. So we had US$3 million in the bank that we mostly didn’t touch, mostly because of the cash flow dynamics.”

“We were able to do so much without touching the bank account. That is the closest thing I have to a cheat code,” said Christina.

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Main image of Edith Harbaugh and Eynat Guez discussing unicorn funding at Collision 2022: Stephen McCarthy/Web Summit (CC BY 2.0)