One of the most dangerous things for a startup business is trying to grow too quickly. In his blog, Jun Loayza describes how RewardMe, one of the startups he was involved in, failed after it tried to scale to fast.
In his list of factors that led to RewardMe’s demise Loayza cites an undue focus on customer acquisition, however this is a fundamental part of the current Silicon Valley greater fool model.
As the exit strategy is to sell the business, whether it’s to a trade buyer or through an IPO, the aim is to maximise the value of the operation ahead of that sale. Boosting the numbers of users is a key task for management.
Loayza says in retrospect he would have liked to focus on product development rather than user acquisition, but that’s a luxury not available when you’ve taken venture capital funding.