How to choose the right next step
Imagine that you’re the founder with a growing start-up that you’ve bootstrapped for the last three years. You are proud of your achievements and you know the company has great potential, but you’re facing a cash crunch. Some invoices are late and payroll is due soon.
You are starting to panic.
The thought about raising money returns. Not only will this help you bridge the gap, it will also allow you to scale your advertising and grow market share. This is exciting, and you’re starting to picture your name in lights.
But, some of your founder friends already have investors and you’ve heard some real horror stories. One founder friend got fired from his own company by his VCs, and another one has to constantly soothe the ego of a clueless high-net-worth investor on her cap table.
Maybe fundraising isn’t the right strategy after all. But, Mark Zuckerberg couldn’t have built Meta into a global behemoth without the likes of A16Z.
And so you keep deliberating, and considering your options and getting advice…and doing nothing.
While this looks like useful action, at some point this becomes analysis paralysis.
We have all been in this situation, whether we run a business, are climbing the corporate ladder or considering writing an investment check. Yes, some research and deliberation are useful, but too much has diminishing returns.
So how do we know when to stop?
This is when we can use the Best Doable Option method from the Design Thinking school of thought.
Bill Burnett, the founder of the Design Lab at Stanford, says that
“despite many layers of complexity, lots of tines there aren’t infinite versions of possible solutions to your problem.
By taking a bias to action approach, you get unstuck, make a decision, and move into your future — a future that you chose instead of one that would eventually be chosen for you by inaction.
When you get good at recognizing your BDOs, you get good at making actionable choices and are the designer of your future.”
Let’s go back to our founder’s dilemma. What are your real options today?
· Fundraise from people you know
· Fundraise from cold contacts
· Not fundraise and sustain by making revenue
· Shut down the business
You do not want to shut down the business, so that narrows it down to three. But, in reality only two of them really exist today.
It is highly unlikely that you could raise any money from cold contacts, and this is what Bill Burnett calls a “Best Theoretical Option.” It is the option we usually really want to exist, but it is often out of reach.
When reviewing your Best Doable Options, be careful not to get distracted by the Best Theoretical Options. They are irrelevant.
This leaves you with two options: fundraise from contacts or pursue revenues.
The decision then becomes much easier: given the cashflow crunch, which one of these options is most likely to convert soon and not damage the company in the long term?
If the only willing investor is a weirdo, whom you have a feeling would cause mayhem in the long run, then that leaves just one option: carry on working on sales.
But, if your former boss and mentor, whom you adore has offered to invest at a reasonable valuation, then fundraising looks pretty good after all.
It all depends on what you genuinely have available in front of you today, not in the theoretical or distant future.
The Best Doable Option method is one of my favorite ways to move forward fast, whether in product innovation, venture building or career strategy.
Progress comes from choosing one BDO after the other: this is how you relate your big vision to your to do list today.
If you want to go deeper into this concept and other Design Thinking Methodologies, come to my workshop on Sunday:
Design Thinking for Career & Venture Growth (12 pm EDT, $97)
It is the core methodology behind the success of designer-led companies like AirBnb and Snap, and is a key leadership skillset for the Digital Age.
I hope you can join us.
