The 30-second perspective change for the CEO or Founder of a Seed-Stage Company

Read time: 2.5 minutes

How Seed-Stage Founders Should Analyze Their Budget Reductions:

1. The ability to hit your numbers means that reality has caught up with your budget model.

Early variances provide valuable input, and early variances are not a negative indicator. They indicate that your assumptions about customers, pricing, hiring velocity, and sales cycles were realized before they were anticipated.

2. The early variance represents progress, not incompetence.

If your first forecast was not broken, then you probably were not protecting any meaningful testing. The focus of the seed stage is to uncover what isn’t right fast, not defend the initial plan.

3. All budgets are bets at the seed stage, not commitments.

Some assumptions have always been wrong. The true error was not in missing the assumption; it was clinging to a bet when there was evidence to indicate it did not hold.

4. Cutting expenses at a swift pace tends to destroy an experiment before it can teach you anything.

A quick cut may seem responsible, but a quick cut often eliminates the signals that you require. Too many quick corrections will substitute learning for emotional reassurance.

5. The question you ask dictates whether you will learn or panic.

Asking the question, "Where do we cut?" focuses your options, whereas asking, "What assumption just broke?" allows you to investigate further and maintain more strategic flexibility.

6. Seed stage founders rely upon speed and agility as their competitive advantage.

Strong founders of seed-stage companies emphasize the importance of signal over comfort, speed over fine-tuning and the value of learning over the illusion of control. Precision can occur later, but the learning process should take place as quickly as possible.

💡Key Takeaway: 

At the seed stage, when budgets "break," it is more about recognizing real-time realities than a failed plan and will cause those who learn quickly from it to have a multiplier effect over time. For the panic-stricken founders, the desire is to hold onto the original plan, which isn't designed to withstand first contact.