It's been a tough funding environment for the past 2 years, but even in this brutal environment great startups have been able to successfully raise the capital they need. And even for the best startups, the fundraising process proves to be exhausting and time consuming. So once a raise is "done and dusted" there's always an amazing feeling of relief. But what happens "Day 1" after a raise? Here are a few thoughts for Founders and VCs about shifting from a “need to raise” to a “need to prove” mindset. Venture investing is very simple at its core. VCs invest in Founders who are building businesses that solve big problems. Every Founder’s pitch describe a large profound problem, their solution to the problem, and the financials the business will generate over time. Getting the problem and solutions statements right is important. They’re what customers ultimately care about and define a startup’s reason d’etre. But unless the solution can be delivered profitably at scale the business won’t survive. This is “sine qua non” for success. But success isn’t a 0/1 switch. VCs understand that startups are built in stages and that great companies are built on top of good companies. They can fall in love with a startup’s vision, but eventually the numbers need to fall in place for a startup to be “great”. So while a well-crafted narrative can convince a VC to write a super early-stage check, disciplined early/mid stage VCs strive to make decisions based on answering the question: “How quickly and how much can a startup learn for how much money?” When a startup puts money to work it gains insight into the business’s underlying assumptions. Positive results: Progress has been made towards de-risking the outcome. Negative results: At best the business is no closer to de-risking the outcome. Building a startup is about turning over cards and hoping for positive proof that the business is on track. But while VC investing is about analyzing cards as they’re turned over, being a Founder is about lining up the cards and determining the order they’re turned over. The beauty of completing a fundraise is that a startup’s runway has been extended which allows a Founder to turn his/her attention to de-risking the business by turning over more cards. They can move from “Oxygen” mode to “Water” or “Food” mode with the new capital! Thread on the topic: A startup’s learning agenda should turn over enough cards that the startup is “materially different” when the next fundraise begins. Proving out critical assumptions is important. Scaling with improving economics matters. Filling in competency/people gaps is essential. Thread on the topic: @SahilBloom talks about inversion focused problem-solving skills in an amazingly constructed thread. Startups should focus on what they want to look like before needing to raise again and work backwards from this goal. Thread on the topic: So while there’s no perfect playbook for constructing a learning agenda, what follows are a few questions that a Founder should be asking about their business before locking one in. The list is illustrative but by no means complete: Proof that customers want your product Is it easy to find and close new customers? Are your customers engaging with your product the way you want them to? Is attrition low/retention high? Is organic traffic/referrals a major contributor to growth? Proof that you can scale Is CAC staying steady as you increase your origination volume? Are you able to originate new customers in multiple, deep channels? Have you built a proprietary originations channel and if so, how deep is it? Proof that customers are profitable Are contribution margins positive? Are payback periods within an acceptable range? Are the unit economics of each vintage improving over time? Proof that business level profitability is possible Is overhead as % of revenue declining? Is the burn rate monotonically decreasing as the business scales? Is there line of sight to in-period profitability if “new investments” were shut off? Proof that additional contribution margin is possible Are existing customers willing to buy additional products? Can price be increased in a profitable fashion? Can 3rd party contracts be renegotiated to improve margins? Can automation drive efficiency and reduce cost? Proof that you can attract and retain talent Is the team happy and does talent stick around? How quickly can you fill open positions with top-tier hires? Are there employee complaints/lawsuits? Have heavy hitters been recruited to expand the Executive ranks/capabilities? Proof of operational discipline Is the team able to deliver against their operating plan? Has the team been able to obtain necessary licenses and negotiate good 3rd party contracts? Are operational mistakes and complaints/lawsuits handled quickly and with minimal collateral damage? The above is a merely a sampling of the questions that a Founder could ask when setting a learning agenda. But unfortunately learning takes time and effort and spreading resources too thin is the best plan for showing up to your next fundraise with half-finished homework. So, if you’re building a startup, the best time to take stock of what you’ve learned and what you still have to prove is immediately after raising capital. It’s important to shift from “need to raise” into “need to prove” mode so do it the day after a raise is completed!