dangletech

If you have been in a start-up you will have heard the question “How much runway do you have?” For the un-anointed that is a question potential investors ask and it expands to “Given your current net burn rate, how long can you survive on your current financing and when will you need more cash?” The irony is that investors often like to invest when you don’t need the money right now.

Let’s start with a given “The world is very unkind to small underfinanced companies” which is just about every small company unless you have happily stumbled on the next sure-fire Google type opportunity.

It seems you can get all the money you want when you don’t need it but can’t get help when you most need it. As you start to run out of cash the bank is usually the first to notice and close in making life much more difficult. Suddenly your credit line gets conditions added to it or is frozen or removed ... receivables are suddenly all questionable ... new programs do not allow the bank to consider international shipments, or your guarantor has just change account managers and they are reviewing their commitment or you have suddenly arrived on a “Watch list” at a VC and now their “Restructuring” department wants weekly cash flows, retrenching plans or product consolidation plans to review constantly.

You look back and wonder, “Where did my runway go? It ran out a lot faster than I thought.”

In my opinion it can too often be traced back to a major issue of Speed. The speed of making decisions and implementing them immediately.

An old boss once said “Once you know what you are going to do, why would you wait?” Sleeping on it or taking time to think it through further is a luxury we often don’t have. I reality this translates often into making a decision at 3 PM and acting on it by 5 PM, not 5PM a month from now. Of course some major decisions need board concurrence but you can’t wait for the next board meeting to shelve a product or close an office or hire an R&D manager or sign up for a key unforecasted and expensive trade show. If needed now is the time to call the dreaded emergency board meeting (after trying to find a way around it by consulting with the chairperson).

Bless their hearts, most experienced investors know how fast you can run out of runway because they have seen it happen before. The fact is that financial issues snowball much faster than you expect when you are near the end of your runway. This is when initial investors claim they are behind you but will not put pen to paper to bail you out until you have new investors at the table. So aside from the task of ‘always’ being in financing mode (because now you know the end of the runway is an illusion) you need to learn the lesson of Speed. I can pretty much guarantee that there will be days when you look back and say, “Many of the decisions I took were the right ones but I wish I had made them faster.”

SPEED is everything but how do you learn the lessons of Speed. You constantly prioritize your biggest opportunities and threats, especially the ones that relate to your financial position. You focus like a laser on the top one or two doing whatever you need to do to get to a resolution in your mind. And then you execute FAST. You may look like you have gone off on a tangent to your management team but this is a sleeves up, CEO only job and the company’s future depends on you to fix this. If you are thinking in terms of a month for a key change then you really need to do it in a week. If you are thinking of a week then you really have a day if you do not want to regret your execution cycle and blame yourself later.

So, may the angels smile on you and make your life easy with runway with no end in sight but for the rest of us mortals, learn about Speed and then redouble your efforts to make decisions much faster and execute them immediately and get on with the next item on the priority list.