As a founder, if you are *truly* in it for the long haul, it’s in your absolute best interest to get to “default-alive” as soon as possible.
Default-alive ensures you can play the right long-term game, adopt an operating strategy that doesn’t over-optimize for the short term, and execute in partnership with stakeholders (employees, customers, partners, investors) that are deeply aligned with you.
And then, when all the pieces of the orchestra are starting to come together in the beginning notes of a beautiful symphony, that’s when you raise maximum capital and step on the gas.
You know what the best part is? In this case, you continue to be the orchestra’s conductor for a long time, with maximum ownership & ultimate value capture.
Now, there is a Catch-22 here. Getting to default-alive usually comes at the cost of rapid growth. And as we all know, VCs index on growth while evaluating startups. So does the company become unfundable while on the default-alive path?
My response is, it depends on the market dynamics, competitive intensity, and progress towards PMF/ how much time & effort will it take to get PMF (eg. h/w vs s/w, large enterprise contracts vs PLG/prosumer etc.).
That’s why it’s a very nuanced and contextual decision that founders need to think through, ideally jointly with seed investors.
Private market windows are fickle and keep opening & shutting down based on sentiment around the domain, progress in the business, the founder’s storytelling etc. As a founder, one has to be able to survive (often at the cost of growth) when the window is shut. And then create momentum & raise again when the window re-opens and/or an inflection point gets reached in the business.
In the majority of cases I have seen, it plays out like this:
Company raises a round -> burns towards finding PMF -> is unable to raise the next round, either due to not hitting adequate milestones and/or market conditions -> founders raise a bridge and continue with less resources.
It can play out in 2 ways from here:
(1) No PMF possible, founder loses conviction, shut down, or
(2) Grind towards early PMF, still have conviction, try to raise again.
In (2), if you can raise, then it’s great. You have a PMF’d business + capital to deploy and accelerate growth.
However, if you aren’t able to raise and you aren’t default-alive, then even after finding that elusive PMF (which 9 out of 10 startups are unable to find ever), you can’t do anything with it and have to shut down.
But, if you have PMF and are default-alive, then you can still continue the journey (perhaps with lower growth) until you either hit another inflection point in the business and/or the private market window opens up for you. In which case, you then raise, accelerate growth, and continue building.
TLDR: If you can be patient and be willing to grind hard upfront without seeking external validation, being default-alive is one of the best ways to live & build!