Things were going well. The startup was making good progress over the course of several years and had reached a point of modest self-sustainability. Then, what had been steady 30-50% per year growth rates, stalled completely and turned into a revenue decline. For Software-as-a-Service (SaaS) companies, growth is the biggest driver to earn a premium valuation for the business.
Here are a few ideas when growth stalls:
- Evaluate how much of the change in business growth is due to market dynamics (e.g. new entrants or competition) vs. macro economic factors (e.g. a recession that hits all players)
- Review expenses, cash burn, and runway, especially if the business isn’t profitable (venture investors are going to be extremely concerned when a portfolio company stops growing)
- Consider adjacent products, verticals, geographies, etc. and how that will help/hurt the core business vs. the overall business
- Reach out to mentors and advisors and get feedback and advice — you never know who’s already experienced this first-hand
- Engage with key team members as the most talented people are going to start looking for other opportunities if the business isn’t growing
Remember that a startup is a scalable, growth-focused company. If growth stalls or a decline sets in, the dynamics of the business can change dramatically.
What else? What are some more thoughts on growth stalling in a startup?