Venture Capitalist at Theory

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1 minute read / Feb 15, 2013 /

Building A Money Machine

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Successful startups are money machines: they ingest a dollar of investment and produce more than a dollar in revenue.

There are three steps to build a money machine:

  1. Find or create a product many people will use.
  2. Convince customers to buy the product.
  3. Mechanize the two processes above, reducing costs and increasing profitability to finance growth.

Startups repeat these three steps many times during their lifespans. In a team of seven people, there may be five engineers building the product, one product manager marketing the product and one salesperson. But to grow to be a big company, all those teams and functions must be continuously reinvented, tuned and refined.

Whether working with ThredUp, an online consignment store, or AxialMarket, a market place for private capital, or Electric Imp, the infrastructure that powers the internet of things, the progression through these steps is similar. And one of these disciplines is always the limiting factor.

When evaluating the priorities for your business, frame your startup’s progression using this framework. Your goal is to identify which of the three steps currently limits the growth of the business so that you can systematically eliminate the current bottleneck, the friction to limiting greater output from your money-machine.

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