Should I Stay or Should I Go? Insights Needed for Series A Startup

Question

Hi guys,I&rsquo;m reaching out for some advice and insights on my startup's current situation.We secured Series A funding in 2022 and we're operating a niche marketplace in an emergent country where each customer typically makes a purchase every year. Financially, we have about $9MM in the bank, giving us a runway of approximately 18 months. Our monthly burn rate is $500,000, with 15% of that dedicated to online marketing across google, meta, and TikTok.The company consists of 40 people: 20% are c-level, 40% are in tech/product/design, and the remaining 40% are in bizdev/marketing/operations.Customer acquisition has been solely through online marketing, bringing in around 3,500 new customers per MONTH (4% monthly growth rate right now). However, our customer acquisition cost (CAC) is $20/customer ($65,000/month), and we generate a gross revenue of $6/customer ($20,000/month), resulting in an LTV/CAC ratio = 0.3 .My concerns are mainly around our lack of significant growth and the competitive landscape, where our product lacks a distinct competitive advantage. Additionally, I'm worried about whether I should stay or move on to something new. Both my team and I are highly unmotivated, feeling a lack of learning opportunities and a sense of stagnation in our careers.Given this context, I&rsquo;d love to get your input on a few things:1. Are there any red flags in our current situation?2. Is our current approach sustainable in the long term?3. Am I being overly pessimistic about our prospects?4. Should I consider moving on due to the stagnation my team and I are experiencing?I would greatly appreciate any thoughts, experiences, or advice you might have. Thanks in advance for your help!

GianFabien · Accepted Answer

Even if the $6/customer is recurring revenue, you need to retain every customer for 4+ years to make back your CAC.
So with costs of $65k/mth and revenue of $20k/mth you are going backwards at $45k/mth. But you say your burn rate is $500k/mth. Which suggests that there is a further $455k/mth being burnt on whatever. I just don't see how you'll ever become cash-flow positive.
Based on your numbers, I'm guessing you have about 40k customers. Even by the most optimistic estimates you need over 1 million retained customers to break even. To get there you will need to invest a further $20M based on your CAC.
Sorry, the numbers just don't make sense. Of course, I could be reading stuff between the lines that is wildly incorrect. But for me it is red flags all around.

tuttyboy · Answer

Red flags: you only have 40 people and consider some c-level; most of your spend is on marketing content that is fleeting (no lasting value); with as many people in marketing as product, it seems like you want it to work more than it actually works.Say goodbye to everyone not in product and focus on &ldquo;marketing content&rdquo; that shows how to effectively use the product. Maybe keep one marketer to do this.

retrocryptid · Answer

I'm old enough to remember when companies tried to make more revenue than expenses and we called that "profitability." But these days there's so much money out there, you just jeep going back to the VC.How closely related are your co-founders parents to the guy running the VC fund that gave you a series A?

michaelshoe · Answer

Just like the right answer to "when should I let this person go?" is the first time the idea of firing him crosses your mind, maybe the right answer to this situation is the same: You should be looking for a new opportunity and move on the first time that idea crosses your mind...When you think something is off, it usually is... and waiting on it will not change its trajectory.