Logistics, Startups, and Runway
Applying the basic tenets of 'not getting your troops killed' to the problem of 'how2not starve as a startup'.
For my inaugural post, I’ll babble on a little bit about something that I’ve noticed myself doing lately as I plan future expenditure and burn rate, on a fictional amount of runway I have yet to even glimpse at, let alone confirm.
Here’s how to use a couple of lessons from the military in managing startup burn.
Military operations planning
The basic idea underlying any sort of military operation is achieving your objective successfully, at minimal cost. The latter bit is useful because any mission is likely to get ‘charlie-miked', which is NATO phonetic for ‘continue mission’.
Imagine you’re out in the jungle. You’ve got 6 mags of ammunition, as does everyone else, and you’re meant to take a hill. You get into a nasty firefight with the people sitting at the top, but eventually, you kill them and now, you’re the ones sitting atop the hill. Great stuff.
How much ammo have you burned through? Ideally, 4 mags, because you need the other 2 to repel the eventual counter-attack (it’s generally understood that assaulting an objective takes more guns, ammo, and bodies than defending one). If you managed to take it with less, good for you, because now you’re much better prepared for whatever comes at you next.
But if you burned through everything, you’ll quickly realise that all the luck and positive thinking in the world won’t fit into your magwell when those guys you chased off the hill are back to shit all over your day.
Now, holding the objective is a reasonable charlie-mike. Thereafter, you get resupplied, and presumably higher command will then ask you to move on to another objective, or exfil, or maybe just sit tight because those other guys really, REALLY want that hill back. All of this other stuff is however contingent on the resupply, because you’re out of ammo, water, and food, so you can’t do shit even if you wanted to. If resupply doesn’t come, then you can get fucked, or you can egress, or you can MacGyver your way out. I don’t know. The number of available options at this point is only limited by your creativity and daring.
Alternatively, you never get counter-attacked. Those other guys are dead, or they gave up, or whatever. In which case, you get resupplied enough for your next mission, and you go on your merry way.
That’s a classic doctrinal walkthrough of how a mission goes. At this point, you should be able to see some broad parallels with the way that startup funding rounds go.
Apples and oranges
Now obviously it’s not an exact analogy. You don’t, or at least you shouldn’t have to negotiate with higher command why you need ammo and water. And resupply shouldn’t be contingent on whether you succeeded prior. But higher command, like any VC firm, has a limited pool of resources, and they’ll have to make choices as to which allocation is best in view of its ultimate objectives i.e. what choice furthers the war effort best?
Combat ineffective units might get rotated to the rear, much like how unviable startups get wound down or undergo forced acquisition events. Or, and as unpalatable as an option it is, sometimes units get sacrificed in the field. They get told to stand their ground, fight to the last man, that sort of thing. Sometimes it turns out well, like in Stalingrad. Sometimes everyone dies, as with the Malay Regiment at Bukit Chandu during the Battle of Singapore. I’ll let you do the thinking as to how that applies to startups.
Don’t overextend
Anyway I’m starting to lose the plot. My point is that much as it is with a military operation, you’ll start out with a set of exhaustible resources - either runway or bullets. It’s fairly conventional wisdom that you should stretch those resources to last until you get your next round of funding, and not overextend yourself. It didn’t go well for Hitler in Russia, and it won’t go well for you.
That having been said, here’s another thing to consider: what if you get ‘charlie-miked’?
Deals fall through, term sheets sometimes (but rarely) fail to get executed, and if you weren’t paying attention, you’re now saddled with an onerous no-shop clause that the VC isn’t willing to budge on, while you’re shitting yourself wondering what to do now. That empty, hollow feeling in the pit of your stomach? Yeah, that’s what getting charlie-miked feels like.
It’s also conventional wisdom that negotiating funding when you’re still flush from your last round gives you more leverage. By the inverse of that, having no funding gives you absolutely nothing in the way of security. I’m not saying you should under-extend yourself and fail to make the most of what you have (that’s called maximising the limit of exploitation, which I’ll talk about some other time when I feel like it), but it’s something to keep in mind.
It’s easy to fall into the rapid growth trap and expand too quickly. If you’re lucky enough to be faced with that set of choices, maybe just think about it a little from this perspective. Maybe keeping that last 2 mags in your back pocket might save your life later.