For startups, growth is everything. But what happens when you hit the accelerator too hard, with billions in investment pouring in?
Casey Woo, WeWork's former Global Head of Strategic Finance, had a front-row seat to their hyper-growth phase and the chaos that came with it.
Prioritizing growth over financial fundamentals
The driving force wasn't business fundamentals, but the billions pouring in from investors. The team was pushing to hit ever-more aggressive targets and justify the company's skyrocketing valuation.
As Casey reflects, "By prioritizing fundraising over profitability, WeWork was setting itself up for an inevitable reckoning. The public markets have a way of eventually cutting through the hype and demanding real results."
Lessons for early-stage startups
Yes, startups should dream big and push boundaries. But they also have to maintain discipline and stay grounded in the realities of their business.
As Casey mentions, “Financial models are just the translation of business into numbers. But business is what leads it. A lot of people just think about numbers, but they are only a tool."
Decisions were made to meet aggressive expansion targets without enough consideration of their long-term impacts. This environment, while exciting, created significant challenges as the team often had to make decisions under immense pressure.
So what can founders and finance leaders learn from this analysis?
- Monitor the right metrics: While growth metrics are important, don't lose sight of the key financial and operational KPIs that reflect the true health of your business. Tools like Puzzle can provide that real-time visibility and help you adjust your strategy as needed.
- Set ambitious but achievable goals: Startups need to maintain a balance between growth and business fundamentals. Puzzle's features allow you to align your team’s efforts with realistic and data-driven targets.
- Stay disciplined: Make decisions based on business realities, not just the pressure to justify a valuation or hit arbitrary targets. Puzzle has tools to help you keep your financial planning grounded in reality and backed by solid data.
- Think long-term: Consider how your growth strategy will play out in the long run, particularly if you plan to go public.
Billions in funding can help companies reach unimaginable heights. But the lesson is clear: pursue growth sustainably, with a constant eye on the operational and financial fundamentals.
These challenges are universal for companies, even if the specifics vary, particularly when managing market growth. In the startup world, it's all about striking that critical balance. Tools like Puzzle can help by providing the real-time visibility and insights needed to make data-driven decisions at every stage of growth.
If you'd like to listen to the full episode featuring Casey Woo, check out the Turpentine Finance Podcast!
