Can Irish Startups Play at Silicon Valley's Level?
Part 2: Revenue over Investment
Irish startups should be more focused on revenue over investment.
Yet, we are copying Silicon Valley founders who spend 50%+ of their time pitching for investment.
Unfortunately:
Investment is a weak signal that your startup is strong - much weaker than revenue.
Silicon Valley’s emphasis on fundraising money doesn’t make it a good idea. Emphasising fundraising when you get 5x lower valuations is an even worse idea.
You don’t have to play the game that way…
To maximise success as a founder → Revenue over Investment.
Revenue is your Strongest Signal.
When it comes to building startups, the flow of information is primarily from ideas to founders to investors.
If founders spend 50%+ of their time fundraising, they misunderstand how information flows. Instead of getting signals directly from problems and opportunities, they get a derivative signal from investors….
Put differently:
Revenue is a direct signal that your opportunity is good.
Investment is a derivative signal. It’s a signal that investors saw a signal that your idea is good.
Not only is revenue a more direct signal than investment, it’s a less biased signal. Investors have a motivation for you to drive high revenue, but only after they have invested (and even then, they will want to invest again later).
Consider what is best for you as a founder (and later, for you and your employees). It is in your interest to get direct validation - as soon as possible - that what you are spending your time on is worth it.
Revenue is your Comparative Advantage.
Startups outside of Silicon Valley fundraise at much lower valuations. Therefore, outside startups that focus on over investment are at a comparative advantage.
Focusing on investment outside of Silicon Valley is even worse than that… VC firms and YCombinator have made fundraising sexy, so Silicon Valley’s focus on fundraising has itself become overrated.
Irish startups focused on revenue are at a comparative advantage.
How to focus on Revenue.
Software companies can easily focus on revenue. Building products is now cheap with tools like ChatGPT and Adalo. Organic distribution is free with YouTube, X, LinkedIn and Instagram. This is how I am building Trelis.com .
Most hardware companies should be able to get revenue before investment. Payment for milestones or for trials makes this possible. When I ran a membrane technology company, I refused to give free trials to customers. Free trials are a weak signal of customer interest.
Harder companies. If you really can’t generate revenue, then maybe you should park this idea for later. You have a long life, and spending a few years being successful will put you in a far stronger position.
Building Ambition for Revenue
Revenue is under-rated and can be your advantage.
Post on social media when you have learned from customers, not pitched to investors…
…when you close a deal, not a funding round.