Markets are made by creating products that few companies can make and that many people love. The scarcity of supply creates a number of advantages. One of them is leverage.
In most cases, leverage allows suppliers to scale and charge (more) for their products.
What makes decreasing urgency and increasing patience more difficult to achieve, agonisingly so, is a lack of leverage.
And in startup leverage is the one thing you never have in the beginning.
As most founders (and investors) comes to realise with time is that the tide on leverage only turns if you stay in market long enough to crack the code of value for large groups of people.
When leverage takes longer than expected and founders get stuck in a high urgency, low patience gear, they tend to commit a cardinal sin of building a business: mistaking ambition for leverage.
Don’t get me wrong, ambition is to be admired. It will convince a lot of people of future value.
But there is a line that should be approached with caution.
And that line is crossed when a founder is so convinced of the (future) value of their product that they try to make a prospective investor or partner feel as though they have no choice but to engage.
In other words, they use leverage they don’t have to force an outcome.
This is a bummer because the founder loses twice.
Not only do seasoned investors and decision makers see this coming a mile away and disengage, teams also see this behaviour and start to question their grip on reality.
Take these fundraising and partnership scenarios as case in point.
In an investment round, this can look like a founder saying that they have commitments for a large proportion of the capital being raised and that demand is so strong that it looks like the round will be oversubscribed.
All it takes is for the investor to ask for the term sheet and tell the founder that they will be the last money in.
In a partnership negotiation, this can look like a founder trying to play two companies in a duopoly or close-knit industry off against each another.
All it takes is for former colleagues to make a call and ask if the founder’s story is legit and if it’s not, the game is over.