What’s The Right Way To Run Your Startup?

brett fox
4 min readApr 19

I love the idea that something has changed in the world of startups. That somehow, today, you actually have to worry about arcane ideas like profitability, gross margins, and financial management. Oh, the horror!

Picture: Depositphotos

Even more to the point, I just don’t get why so many people are acting like the world is over because you’ll actually have to manage your startup properly? Give me a break!

In 2016, I wrote an article titled, “Why You Should Ignore The Rise Of The Unicorns”. In this article, I argued that Unicorns were really a Venture Capital backed Ponzi Scheme in disguise.

Well, it took over six years to show that I was right. Look at what’s happened to Unicorns. These startups, that were valued at greater than $1 billion, are having trouble raising their next round of funding. Those lucky enough to raise funding saw their valuations, according to leading Silicon Valley law firm Cooley Godward, drop by 85 percent.


Venture capital cycles are predictable.

This is the third major startup crash I’ve lived through. The first was the Communications Bubble of the late 1990s. Then there was the 2008 Great Recession, and now we have today’s Unicorn Bubble.

In the early stages of each cycle, startup valuations are reasonable to low. It was difficult, but not impossible for well-run startups to get funded.

Inevitably, at this stage in the cycle, there’s a push, like there is today, for profitability and frugality. That’s why Sequoia Capital has issued a second R.I.P. manifesto for its portfolio companies to follow.

Then, as more money flows into the startup ecosystem from the limited partners that back VCs, valuations start increasing. Suddenly VCs put pressure on portfolio companies to abandon fundamentals and grow faster.

Then, in the mid to late stages of the cycle, greed sets in. At this point in the cycle, the push to manage your company responsibly goes away. All that matters is how can the valuation be increased, so investors can profit.

In the comms bubble of the late 1990s, VCs were having their portfolio companies IPO to an unsuspecting public. Most of these companies had no…

brett fox

I work with startup CEOs to help them grow their businesses . I built several businesses from $0 to >$100M. Learn more at https://www.brettjfox.com

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