When Growth masks strategic flaws.

In 2015 a promising tech enterprise secured VC funding. With cash being thrown at it, the company became a unicorn peaking at a $2bn valuation and in 3 years was active across 200 locations in China, Europe & USA. It had 500,000 daily users!

 The VC investors and the company executives all took the praise that the media threw at them in the first few years. The media hailed the company as “one of the words greatest” and the founders worth was estimated at $5bn.

 The thing is ! success inspires competition.  

 Now:- competition is a good thing. ! It forces companies to meet the needs of their customers by improving the product to retain consumption. But this particular unicorn (and by association its VC funders) was completely void of any strategy around customer retention. The notion of customer loyalty hinged on the principle that they were first to market, the only game in town and customers didn’t have a choice but to engage with them. Not wholly dissimilar to Blackberry & Blockbuster Video's ideology.

This naivety left them completely exposed as more strategically astute competitors entered their market, identified vulnerabilities uncovered opportunities and exploited them to capture market share.

A $2bn VC funded company was lost in an unstructured and unstrategised quest for global dominance. Management & VC ineptitude had created an unidentified (to them) fragility that was exposed as competition emerged. Realising they had cultivated zero brand loyalty, faced a cash shortfall to fight competition when the competition was more attractive to the consumer. Added to this was also an underestimation of operating costs. A three year head start and hundreds of million in investment had been wasted.

 5 years after launching it was dissolved as it couldn’t pay its debts, with 16 million customers owed money accusing founder and his subscription model of essentially running a Ponzi scheme.

 Now this company was first to market, it had a strong product, was market leading, with an identifiable and recurring user need. It should never have failed, even if it lost the majority of its market share.  

What this company did, and the market need it serviced is irrelevant to the learning here.

The point here is that being given capital to grow and a ‘pat on the back’ does not guarantee success.

In 2022 over half a trillion VC Dollars were invested in companies globally with 25-30% of this investments failing in the first 3 years. 70% dont make it to 10 years.

 Pre-seed failure is 60%, but make it to series C and failure rates sit at 1%. Why

 Well, growth and certainly sustainable long-term growth comes from understanding your product and the demand for it in the multiple markets you can access. Researching your customers, understanding their needs and wants and also the competitive landscape will highlight market opportunities. Taking this research and developing it into a strategy to capture growth in a manner that doesn’t overwhelm you is the key.

 It’s clear from the repeatable early stage failure percentages that there is an absence at worse or misunderstanding at best in both the company and investors who come on board of strategic understanding to ensure growth, both pre and post investment.

 Whilst its understandable for companies to not have the complete suite of skills needed to grow. For investors to lack these is quite bizarre especially as its their money at risk.

 That is why Genoa Black has formed and ‘understanding’ with Quest Corporate (finance) who can provide both equity and debt to facilitate growth for SME’s and corporates.

 Quest Corporate works closely with management teams to understand the business and determine the most appropriate level and type of finance. They look at different future (stress test) scenarios particularly downside will test the robustness of the plan / model.

 Genoa Black delivers the strategic plans to uncover and deliver growth which not only pays back the debt (if that is the appropriate route) but in an equity scenario the percentage of the equity given away to secure the investment will be recouped in the growth in value of the equity retained as growth is captured.

Don’t let a lack of capital be a barrier to your growth.

Contact us at Genoa Black to discuss how you can grow.