Why Most Venture Backed Startups Struggle to Scale

Have you ever looked at some VC-backed startups and thought, How on earth are they still stuck at $1.5 million ARR? They’ve raised enough money to buy a private island, but their growth chart looks flatter than a pancake. The problem isn’t a lack of resources—it’s what they’re doing with them.

I’ve seen this movie play out way too many times.

Early in my investment journey, I didn’t have a thesis. I threw money at promising founders, most of whom went on to raise big VC rounds. Guess what? The ones who followed the traditional VC playbook are now stuck in the land of eternal ARR stagnation. Meanwhile, the scrappy founders who embraced a bootstrapper’s ethos are thriving. Go figure.

Let me tell you about my own first startup. We sold ~$1.5 million in our first year. The catch? Our technology was held together with duct tape, prayers, and a whole lot of all-nighters. If the tech wasn’t ready, we made it look ready with a “human layer.” It was messy. It was chaotic. But it worked because we hustled. These days, hustle seems like a dirty word in the venture-backed world, replaced by buzzwords like “team scaling” and “hiring for optics.”

I’ve met startups struggling to grow past $1 million ARR, even after raising $7 million and hiring 35 people. Let me save you some mental math: that’s <$30,000 per employee in ARR. When did startups turn into government projects?

But hey, I’m not here to rant (okay, maybe a little). This madness gives me purpose. It’s why I love investing in founders who are ready to rethink how they build and scale their businesses.

My 3 Golden Questions for Founders (a.k.a. My BS Detector)

Before I invest in a company, I skip the TAM projections and the five-year hockey stick graphs. I don’t care about how big the market could be if the stars align and everyone on the planet suddenly needs your product. Instead, I ask three simple questions:

1. Who’s the most credible person/entity in your industry, and what will it take for you to be in the same conversation?
   If you don’t know who’s steering the ship in your industry, you’re probably not ready to captain your own. Credibility is everything. Find out who holds the keys and figure out how to break into that club. (Pro tip: Bribes and flattery don’t hurt. Kidding… mostly.)

2. What’s the bare minimum product you need to make your next Million and why?
   Forget perfection. Perfection is where startups go to die. You need something that’s just good enough to get someone—anyone—to part with their money. Build that. Sell it. Then improve it.

3. Who’s your customer tomorrow, and who’s your customer five years from now?
   Your tomorrow customer is the one who keeps the lights on. Your five-year customer is the one who’ll make you a category leader. If you don’t have a plan for both, you’re flying blind.

If a founder stumbles on these questions or starts rambling about “synergistic paradigms,” that’s a hard pass for me. Because if you don’t know your market and your customers better than your competition, you’re toast. And no, being “pre-revenue” doesn’t make it okay.

ps: I’ll write more on each of these points in upcoming editions.

Hustle Is Not a Dirty Word

I get it. Scaling is hard. VC money can feel like a blessing and a curse, especially when you’ve got a culture that tells you that swanky offices and headcount is a measure of success. But here’s the truth: more funding won’t solve bad fundamentals. You can’t skip the hard work for the fun part.

So before you hire your next employee or order fancy company swag, take a step back. Answer those three questions.

Be brutally honest with yourself.

Because the goal isn’t just to grow headcount—it’s to actually make money.

A note about my motivation for writing this newsletter.

So, one of my 1,652 subscribers—yes, I counted, and no, I don’t have a life—asked me what I'm selling.

The answer is, absolutely nothing!

I’m just here, flinging my wisdom like confetti at a parade, hoping it lands on someone who needs it.

I’m sharing my epic tales of triumph and disaster from the wild world of business-building, hoping to inspire someone to think outside the box—or at least to find the box first. If, along the way, I stumble upon a company worth investing in through my family office, well, that’s just the cherry on top of this non-existent sales sundae. But seriously, folks, I’m not selling anything. Not even a slightly used sense of humor!

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