This is an interesting vulnerability when it comes to raising funds.
I’ve mentioned the other day how once your idea is funded, you’re exposing yourself. In a sentence, it’s this: competitors can raise VC funds easier than before you got funded, since it’s becoming a “hotter” area.
If this specific industry called “ridesharing” had $0 in funding but now it’s got $20m because you’ve proved it, it’s easier for another VC fund to invest… I don’t know, maybe even $5m.
It’s human bias.
Another interesting vulnerability is that once you get funded, you have to choose:
- Go and make the product as good as possible ASAP
- Expand into other areas with what you’ve got
- Strike a balance between 1 and 2.
Regardless of the path, you absolutely need to go full speed ahead. It’s the wisest to go for option #3 — but how do you balance them? 50% and 50%?
On one hand, you can go full speed ahead into making the core of your product good, so that it will scale properly and without huge problems.
On the other hand, you do want to expand into other areas. Otherwise, the Uber-DiDi Chuxing scenario might happen:
Yes, nice, Uber is looking like it’s a brilliant idea, but will they expand to China overnight?
They did and the story with DiDi is longer: Uber owns a part of DiDi and it had a tactical exit. But that played out well. It could’ve played out otherwise just as easily.
So what do you do?
You can to scale properly: that’s option 1.
But you also want to expand into other areas of the globe. And if you don’t do it soon, some other people can walk the trail you’ve blazed.
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