Technology

Understanding the Distinctions Between Effective Founders and Those Who Achieve Greatness

Table of Contents

A Conversation with Anu Hariharan

Hello, and welcome back to Equity, the podcast about the business of startups. Where we unpack the numbers and nuance behind the headlines. This is our Wednesday show, in which we sit down with a guest, talk about their work, and unpack the rest.

A Special Guest

This week, Alex spoke to Anu Hariharan, who’s previously worked with a16z, sits on Brex’s board, and more recently has been investing in later-stage companies at Y Combinator. She’s also working on something new.

The Tweet that Started it All

Hariharan recently tweeted about how ‘great’ founders were successfully guiding their companies toward cash flow positivity. Since that very interesting post, both Instacart (a former Y Combinator company) and Klaviyo have filed to go public. And both have super-strong cash flows.

A Conversation at the Right Time

Our chat could not have come at a better time. We dug into how early- and late-stage startups should approach growth and cash conservation (in her view), the future of venture as an asset class, and how healthy the unicorn herd really is.

Growth and Cash Conservation: Early-Stage Startups

One of the key takeaways from our conversation with Hariharan was the importance of approaching growth and cash conservation differently depending on the stage of a startup. For early-stage startups, she emphasized the need to prioritize rapid experimentation and iteration over careful planning.

The Risks of Over-Capitalization

Hariharan also warned about the risks of over-capitalization in early-stage startups. "When you raise too much money too quickly," she said, "it can create a false sense of security, leading founders to take on more risk and push their companies too hard."

Growth and Cash Conservation: Late-Stage Startups

For late-stage startups, Hariharan emphasized the importance of scaling efficiently while maintaining cash flow positivity. She noted that great founders are able to balance growth with profitability, creating a sustainable business model.

The Future of Venture as an Asset Class

Another key topic we discussed was the future of venture as an asset class. Hariharan believes that the rise of alternative investment platforms and the increasing popularity of secondary markets will lead to more liquidity in the private market.

How Healthy is the Unicorn Herd?

We also touched on the health of the unicorn herd, with Hariharan offering some surprising insights. While many would expect her to be pessimistic about the current state of unicorns, she was refreshingly optimistic.

What Can We Learn from Great Founders?

So what can we learn from great founders like those who have successfully guided their companies toward cash flow positivity? According to Hariharan, there are several key takeaways:

Focus on growth and profitability: Great founders prioritize both growth and profitability. They understand that rapid experimentation and iteration are essential in the early stages of a startup.
Maintain cash flow positivity: Late-stage startups should focus on scaling efficiently while maintaining cash flow positivity.
Balance risk-taking with caution: Great founders take calculated risks, balancing their desire for growth with the need to maintain cash flow positivity.

Conclusion

In conclusion, our conversation with Anu Hariharan was a valuable one. We gained insights into how early- and late-stage startups should approach growth and cash conservation, as well as the future of venture as an asset class and the health of the unicorn herd.