The Peak of Success
Twitter has been in the news again. The social media site has seen its user growth stall at 320 million monthly active users. This is the first time in Twitter’s history that this has happened, although, the BBC reminds us, this is a quite normal growth pattern for a hi-tech business.
However investors are not at all happy and it’s created quite a stir on Wall Street. Shares in Twitter immediately fell by a not insignificant 10% as a result of this news breaking.
As John Naughton writing for The Guardian puts it: “If there’s one thing Wall Street and the tech industry fears, it is the idea that something potentially profitable might peak or reach some kind of equilibrium point. Endless exponential growth is what investors seek. Whereas you or I might think that a company with more than 300 million regular users that pulls in $710m in revenues is doing OK, Wall Street sees it as a potential zombie.”
In a month when our colleagues at SETsquared announced that its member companies raised over £90m of investment in 2015, there’s no shortage of people out there looking to fund innovative high potential businesses. However, if ‘endless exponential growth’ is what investors are looking for, it got us thinking about how early stage businesses can calculate what their ideal ‘peak of success is’ and how they can manage investor expectations effectively around this from the start.
In the flurry of excitement at attracting funding, it can be all too easy to get carried away and promise investors the earth (with your fingers crossed behind your back!). However we all know of the dangers of over promising and under delivering in business so how can this pitfall be avoided? Here are five tips:
- Get talking: by creating a dialogue with your potential investors and keeping lines of communication open, you’ll be able to mutually agree expectations at the start and continue to get their buy-in as things change. It’s important that what success looks like to you looks like success for them.
- Be realistic: challenge your business plan assumptions at every opportunity and with all the resources that you have available to determine whether the goals that you have set are achievable.
- Minimise exposure: naturally investors are looking for a fast and larger than expected return so look at a variety of ways to achieve the funding you need. A good rule of thumb is to think about how much time and money you need and double it! Things always take longer and are more expensive than expected.
- Stay focused: all entrepreneurs know that they have to give their all to their business but working hard and staying focused are two different things. Stick to your plan to deliver what you say you will to your investors. If you need to deviate, consult with them first and explain what’s in it for them if you take your desired course of action.
- Share success: going back to point one, regularly feed your investors with information about when things are going well. It will give them confidence and they should be more on-board when there’s a slow-down or a blip in the game plan.
As the old adage goes, ‘the bigger you are, the harder you fall’ and if the Twitter frenzy is anything to go by, it still rings true today. However, for those of us that don’t have 320 million customers, it’s worth taking a moment to consider what success looks like to you – and sticking to it.