Jyotsna Krishnan
In the early days of the funding winter, we wrote a piece on why we have high conviction in underserved customers, their business models, and our entrepreneurs solving for them. This conviction persists even in the face of macro market conditions, slowdowns, and recessions. As the winter continues and businesses struggle to raise capital, we wanted to elaborate further on one aspect of that piece: customer sentiment versus investor sentiment.
While capital certainly plays a critical role, capital allocators are not business operators. It is up to entrepreneurs to ensure that they focus on building a business that the customer values, rather than focusing on what investors value. This means building margins, pricing, and structure in such a way that customer revenues take care of fundamental business margins – ensuring that the business success or failure is not just pegged to fundraising.
This is not to say that entrepreneurs should not raise equity to scale faster. We expect them to prioritize building a business that customers value. This approach creates an accelerating flywheel of relationships between the entrepreneur, customers and investors. It also creates proof points that investors can follow, rather than a scenario in which the investor’s conviction pushes products down the customer’s throat, without the customer reciprocating by paying upfront.
The key here is choosing what comes first: customer sentiment or investor sentiment.
In a market flush with liquidity, investor sentiments tend to come first. This has often resulted in entrepreneurs building business propositions that cater to investors, and are ostensibly more funding-friendly.
However, investor sentiments are transient, whereas customer sentiments are not that volatile. Especially in large markets like the ones Elevar companies operate in. This foundation of customer satisfaction inspires confidence in investors and leads to funding that drives scale. We believe in this path to building enduring organizations.