Scale vs. Profit: The Who’s Who for Investors

In the dynamic landscape of entrepreneurship and venture capital, the relationship between founders and investors plays a crucial role in shaping the trajectory of a startup.

A thought-provoking debate took place on the?Step Conference ?Main Stage featuring Investors Laith Zraikat and Yana El Dirani , and Founders Mohannad Ali , Nida Sumar, CFA , Lloyed Lobo , and Yousef Albarqawi , and moderator Shubham Yadav , in which they brought valuable insights and different perspectives on the role of founders, the influence of economic factors, and the challenges faced by entrepreneurs in today’s market.?

Who’s in charge?

Nida respectfully challenges the notion that founders are always in charge, citing how the current economic climate and changing costs of capital hinder experimentation and rapid growth. Yousef supports this view, emphasizing the different incentives that exist at the fundamental level for founders and investors, acknowledging that decision-making power depends on circumstances and expectations. Lloyd adds his perspective, highlighting the importance of focus and discipline in a challenging market. He cautions against overspending, stating,

If you overspend, then you run out of options. And then you know, the times are not favorable right now, right to raise like, your next round might not come. And so it’s very important to be focused. And discipline is very important to be an inch wide and a mile deep, then like chasing all kinds of customer personas chasing all kinds of channels…

Striking a balance between investing and maximizing shareholder value requires sound judgment from Founders.?

Adopt Realistic Expectations From Your VC

Shubham reflects on the changing behavior driven by capital availability and emphasizes the ultimate responsibility lies with the entrepreneur to determine the company’s direction. Laith suggests that investors’ strategies are usually driven by established processes, though individual variances can occur. He emphasizes the need to recognize that most VCs follow a disciplined approach and cannot provide magic solutions or silver bullets and that Founders should take the driving wheel so that the VC doesn’t try to take control.?Mohannad also provided valuable insights underscoring the importance of aligning expectations between founders and investors right from the start. He emphasized the need for entrepreneurs to swiftly adapt to changing macroeconomic conditions and adjust expectations, incentives, and strategies accordingly.?

Insights On The Role Of Intellectual Property?

The topic of investing in intellectual property (IP) was brought up. Yana emphasized the significance of startups owning their IP, as it directly impacts growth and potential profitability. Yana stated,

I wouldn’t invest in a startup that doesn’t own the IP because then the potential growth of it, whether scale or profit, is technically non-existent or dependent on third parties.

Reaching a Checkpoint?

The panelists explored the delicate balance between founders and investors in driving a startup’s success. They highlighted the need for founders to align their expectations with investors and swiftly adapt to changing market conditions. Nida, Yousef, and Lloyd emphasized the challenges posed by the current economic climate and the importance of focus, discipline, and sound judgment in maximizing shareholder value. They also acknowledged the difficulties entrepreneurs face in securing initial investments when capital becomes scarce.??

The interplay between founders and investors remains a critical aspect of the startup ecosystem. With these insights, founders can approach their entrepreneurial journey with clarity and purpose, leveraging the symbiotic relationship between founders and investors to drive innovation and success.?

To watch the full conversation, click?here . If you’re interested in learning more about entrepreneurship,?sign up ?for Step Conference 2024.