Money Doesn’t Solve Problems. People Solve Problems.


This post is by Brad Feld from Feld Thoughts


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One of our favorite VC firms to work with is True Ventures. I’ve made many investments over the years with both Jon Callaghan and Tony Conrad, and I love being a co-investor with them.

Recently, Tony told me a great Jon Callaghan quote.

“Money Doesn’t Solve Problems. People Solve Problems.”

I’ve learned this lesson 7,345,123 times.

Every successful company I’ve been involved in had a least one near-death experience. Most of the successful companies I’ve been involved with have had at least one stall period, where growth slowed dramatically for some time. Lots of successful companies I’ve been involved in were tight on cash for extended periods. Some successful companies I’ve been involved in looked like they were doing well if you looked at their top line revenue and growth numbers, but were a disaster below the surface.

Note that I repeated “successful companies I’ve been involved in” for

sentence. Each of these companies that I’m referring to ultimately were successful. I’m separating them from companies I was involved in that failed.

In all of these cases, Jon’s statement is correct. The solution was not to throw money at the company and hope things at the company got better. Instead, the successful companies had a functional leadership team and board that was able to figure out the problems and solve them. While the issues often included some members of the leadership team (including occasionally the CEO), in each case, it required focusing on what wasn’t working, where the problems were, and taking aggressive and decisive action to address them.

Assuming the people addressing the issues were the right people, and the extended team (management and board) focused on the correct problems, and then the team gave each other enough time to see whether or not what they were doing addressed the issues, more often than not things ended up in a happy place. While sometimes the issues were intractable, or the dynamics between the people were ineffective, most of the time the focus on people solving the problems resulted in spending less money.

I have a corollary to Jon’s statement which is: “When things break or stall, slow down your spending.” The momentum of growth often results in expense growth regardless of what is happening in the rest of the business. A lot of this expense growth is headcount but also includes a substantial (and often surprisingly large) mix of variable and discretionary spending. While cutting headcount can be part of the approach, taking a hard look at all expenses, eliminating what is unnecessary or ineffective, and communicating clearly with everyone in the company, can often have an immediate and dramatic impact.

It’s scary to tell everyone in the company exactly what is going on when you are in distress. We recently had a long thread on our CEO list titled Surfacing runway: yes or no? It was brilliant and full of great examples, but one, from a company that had stalled but then went on to be extremely successful, stood out to me. The CEO of that company said that during their stall period:

We shared with all employees both income statement and balance sheet (including cash position) to make clear that we needed to better control our expenses so that we could control our own destiny re runway (it was also in context of decelerating growth rate – our rule of 40 was in the teens). We slowed hiring considerably and created programs called “Save to Reinvest” to drive home a sense of fiscal discipline. We showed the company at each monthly All Hands how the financials were changing from our collective activities.

The solution here was people. Not money. Like it usually is.

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