This is true whether you are seeking product-market fit, or betting on a big expensive but – you hope – transformational hire, or raising your next round.

Here, I’d like to share three tips that I hope entrepreneurs will find useful even when they can’t know in advance what the winning formula will look like.

Tip 1: you are building two products: one for customers and one for investors

As an entrepreneur, you’re necessarily focused on delivering value to customers. However, you're also looking to build a valuable business and, if you are seeking funding from investors, you must also focus on delivering value to investors. Investors come in diverse profiles – some invest in certain sectors, or at certain stages of business, or even in specific business models. Investors are seeking companies to buy into, and generally have a narrow set of ideas of what they are looking for.

Therefore, just like you must understand your target customer profile, you must also determine the ideal investor profile for your business – the investors that are looking to invest in your sector, stage and type of business you are building. You have to understand the criteria such investors use to evaluate the businesses they are considering investing in. Then, armed with that knowledge, you should make sure that your business is offering a compelling investment proposition against these criteria.

This matters more than ever right now as investors have become markedly more discerning. We’ve seen quite a shift in investor behaviour over recent years, with many fintech founders wondering when, and if, the downturn will ever end. A sobering statistic from the previous year is that fintech funding has fallen by 42% in North America alone, a location previously believed to be a hotbed for fintech innovation and growth. More local to us in the UK, startup funding in Q1 of 2024 was down by 19%, indicating a significant reduction of investor interest.

What might you do to increase the odds of securing investment, even once you have made contact with investors of the right profile? Often this requires you to develop ways of acquiring, serving and making money from customers that not only deliver scale, but do so with lower costs as the business scales. For instance, identifying channel partnerships that help sign up customers at reduced costs, investing in automation to reduce the cost of serving customers, and testing value-based pricing to maximise the value extracted from each customer might be areas worth looking at.

Sometimes, these factors amount to an established benchmark for a given sector or business model, like the famous ‘Rule of 40’ for SaaS, whereby the combined quarterly revenue growth and profit margin are at least 40%. The point is that achieving this, or any other benchmark, does not just happen, just like a product that delights customers doesn’t just happen: you have to solve for it.

Tip 2: managing burn counts more than ever

The tendency to spend, especially after you have raised investment, is understandable: it’s only natural that you’ll want to use the funds to deliver the kind of growth you know you need to have a world-beating business.

The question, however, is not whether you should spend – it’s what return you get for the spend. In effect, an investor invests in your business so that you, hopefully with some guidance from your board, can make lots of little investments that cumulatively will result in the performance you sold to your investors. You are, in effect, deploying capital.

The problem is that, while spending is under your control (at least most of the time), the results are not. And the longer it takes for the results to show, the more you will have spent before you know whether you are going to get that return. Your job is twofold: to make the right investments in your business that will generate the right degree of uplift in your business performance, and (and it’s an ‘and’ not an ‘or’) to survive long enough to see that return. Your best chance of mastering this combination is to watch both signals of success (such as growth in customer numbers, or progressing in implementing a big customer) while managing your burn. Can you get the results you need to raise the next round, potentially in a difficult market, without running out of money first?

What results exactly depends on what your current or would-be investors regard as signals your approach is working, so make sure you spend the time to understand that.

Whatever that is, if those signals do not materialise or are not acceptable as markers of success to come, you may have to pull the plug on promising projects that are simply taking too long to translate into meaningful results. Sometimes it means the painful step of reducing the size of your team. It’s often hard to put a stop to investments you have made, and had such high hopes for, but continuing for too long can sink your company. Watch burn like a hawk.

Tip 3: keep company culture of mind

Focusing on cash and performance is essential but not sufficient for building a great company. Even when it looks like success is happening, without a motivated and loyal team that works well together and cares about the mission, that success can be illusory and the progress brittle. Since change and challenge are constant in the life of a startup, it is very easy for a business that seems to be really successful one day to implode the next when the unexpected shows up.

Often what makes all the difference in companies that, despite facing great jeopardy, survive and go on to thrive, is culture. Culture is how each member of your team acts when no one is looking. It’s the unwritten rules of how things are done in your company. And it matters: according to Deloitte, over 80% of executives and employees believe that engaged and motivated staff actively contribute to business success.

Culture is both easy and tough. Easy, because culture happens whether you create it or not, and sometimes the right culture happens because your team is picking up on how you are acting in the business, and knowingly or unknowingly model that behaviour. Tough, because if a toxic culture develops – perhaps because you’ve been anxious and exhausted and have driven the team through fear and pressure in desperation – it’s also really hard to change. And when the culture is bad, and challenges mount, it can be impossible to rally the team to make the miracles needed for the business to pull through.

Here’s my tip: don’t let culture be an afterthought. You may not need a culture deck, but be conscious that how you communicate, how you make decisions, how you deal with setbacks, how you explain (maybe you assign blame) when things go wrong - all these signals have an outsized impact on the culture of your team.

Looking ahead

It’s tough building startups: convincing investors to back you, developing innovative and competitive products that customers love, and getting together the team that makes it all happen. In the current investment landscape, it’s even tougher to raise money, and the pressure to deliver success upon success is more relentless than ever.

Hard as it is, it’s so much easier if you choose the right investors and, in a dialogue with them, make sure that your business delivers the most attractive signals of great returns. Then, once you’ve raised, use those funds with discipline, and be ready to pull the plug when you don’t get the results you expect. And most of all, do it in a way that takes your team with you because, that way, they will be there for you when you need them most.