What Are You Trying to Prove Anyway?

Breaking through the startup Catch 22

You've got an early stage venture, product, or initiative - you need more funding to hire resources, you need more resources to build a better mousetrap but no one will give you more resources until you show more success. Classic Catch-22.

"You mean there's a catch?"

"Sure there's a catch," Doc Daneeka replied. "Catch-22. Anyone who wants to get out of combat duty isn't really crazy."

Joseph Heller - 1961

Joseph Heller's classic novel of the same name popularised the idea of the Catch-22 - a paradox where you can't win because the rules contradict each other - the deck just seems stacked against you.

Being in a startup can feel a little like that. I recently spoke to an entrepreneur who was feeling completely overwhelmed. They took a seed round and based on their burn will run out of money in less than a year. So little time, so much to do. He knows they need to build the technology, define use cases, build product, get users, show traction, build sales and investor presentations, get more TAM data, get success stories, pitch VCs, find office space, etc. etc. etc. It's enough to drive anyone batty.

Fast forward 6 months. Another entrepreneur I recently met with shared with me that he's met with a number of VCs and they've all told him they need to see more Product Market Fit validation to invest...but he knows he's running out of runway - he only has a few short months left and if he can't raise a round he's got to shut it all down.

So what's the solution?

Focus on WAYTPA (pronounced "wait-pah")!

WAYTPA* is the super secret** VC antidote to the startup Catch-22. Basically imagine that each funding stage is a level in a video game.

Each level has its own challenges and objectives and you're given exactly (but no more) the weapons you need to conquer that level.

Focusing on WAYTPA means questioning every single investment in time and money - asking does it allow me to prove what I need to unlock the next level. For example, you won't necessarily need to demonstrate Product Market Fit to raise an A round, but you WILL need to prove that there's a big winnable market, that the technology/approach is valid and defensible and that you've assembled the right team to get your first $5-$10M in bookings. In the same way to go from A to B you will need customers willing to say that they love your technology, are or will get value and would (ideally have) pay a lot for it. By the time you get to C you better be knocking down the bowling pins.

The key is not figuring what to do but what not to do. I recently spoke to an exasperated entrepreneur. He knew he needed to show solid customer traction and revenue to raise his next round of funding. He and his team had busted their butts and gotten to a respectable revenue level but the VCs he wanted were passing on his next round. Turns out he'd missed something big in the WAYTPA equation. He had revenue but it was all over the place - geographically, industry wise, channel wise, and even use-case wise. Investors were looking for proof points that he had a repeatable model that could be expanded and extended. He was (understandably) frustrated - he took the deals that were there. Sure they weren't perfect but why wasn't he getting credit for being scrappy, winning deals and getting to the requested revenue bar. While I see his point, he would have done better to focus his time and energy. Once he realized those wins wouldn't prove what he needed to prove he should have stopped pursuing them and either focused his sales efforts or cut back expenses to lengthen the runway.

So ask yourself - in the next year - What am I trying prove? Am I investing my time and energy on the most important things we need to prove or just being reactive to what we've done before, what's worked in the past, and what people are asking us for?

*WAYTPA = What Are You Trying To Prove Anyway

**not super secret