Building a successful B2B startup pushes a founder to the edge… but in today’s model of work/life balance burnout does not need to be the case.
A founder can attain balance in building a successful company and have a meaningful life by remembering key fundamentals we focus on at Golden Section.
“Balance” is not just a buzzword which is popular among wellness gurus but an effective strategy for founders to focus their energy (as limited as it is) in the right areas. Balance is about making sure a founder is dedicating their time in their organizational ecosystem to the right priorities and people, instead of being unfocused and constantly pushing the gas pedal to the floor.
What is currently popular and not effective
The media and Silicon Valley love to lionize the idea of the hard-driving founder who pushes forward regardless of burnout until they reach unicorn status. There has been no lack of founders who have been pushed by investors to reach continued (and not sustainable) growth only to burn out. In opting into “hustle culture”, the popular concept on social media, for a limited period a founder or team makes headway, only to sacrifice their mental health to reach some arbitrary benchmark.
At Golden Section, we have seen hundreds of examples of companies which grew the wrong way. A basic principle to watch out for is over consuming capital and under-performing on projections. Seems obvious, yet some notable examples of what NOT to do include a founder who consumed $6M+ to build a company to get to $500K in, or another founder who spent $7M+ to build a company that maxed out at $350K in ARR.
But while we’ve seen it done wrong, we’ve also been able to help founders regain their balance.
Why is balance even important?
One could ask why this is even important for a founder… if achieving results is the most important indicator of success, then a factor like balance can be neglected.
The answer is what is the cost of achieving success. Today we do not need to lose our soul to build a highly successful company as professionals are redefining what a successful career is, and that the journey is a marathon and not a sprint.
We live in a world of transparency, and customers want to see they are buying from a company which values balance, their employee’s mental health, and an equitable work environment. All that starts with the founder’s values and views towards building a company.
The Golden Section way
We look at the path forward, with balance not being a nice to have, but the way to build a successful B2B SaaS startup. There are three key pillars which make up the Golden Section way in approaching company building:
The first pillar is an effective partnership; we aim to be the partner we wish we had when we worked at prior companies. We learned from those experiences and want to create equitable partnerships with founders, doing good along with doing well.
A focus on building and supporting a flourishing community is key. When we are driving efficient businesses, it creates the dynamic of human flourishing. Great companies are not built in a vacuum, and need a supportive ecosystem of other entrepreneurs, investors, service providers, and ecosystem partners to succeed.
Finally, there is the commitment to balance, life is more than your business. While working on a startup consumes much of a founder’s time, it’s important for them to have pursuits outside of building their company. Down time to reflect and recharge are key for long-term success.
What does balance look like?
How does balance translate from an operating perspective to a more successful business model? It means less capital is needed. As an example, according to the industry average, a company takes $8M of equity to produce $5M in ARR, while our portfolio companies take $1M equity and turn that into $5M in ARR.
Balance equates to value creation versus valuation chasing; value is created through revenue growth, and that means creating a product consumers buy.
This also means maintaining ownership of a company (most founders own less than 20% of their company at the time of exit) along with capital efficiency. Our definition of capital efficiency refers to both financial and human capital. Regarding financial capital, we help founders turn $1 of equity into $8 of ARR (15X average) through our expertise, guidance, and business philosophy. For human capital, that means balance; scaling a company shouldn’t take over and consume your life.
As a snapshot, our Fund 1 companies have grown from 700K of ARR to 9M of ARR on average with only 600K of capital consumed… and we only own 15% of their business. As our goals are ultimately investing and partnering with founders to see meaningful exits, this is our proof.
The idea of balancing building a successful startup with a life, and maintaining mental health, along with clear decision making towards the company’s growth is the way forward. As a result, we will continue to work with founders based on our successful model in creating win-win scenarios for all parties.