How to become Default Alive

Read time: 3 minutes

In the startup world, being "default alive" is a crucial state.

It means your startup can sustain itself and continue operating without the constant need for additional funding.

This is something every founder should care deeply about, as it ensures your startup doesn't run out of runway and has a fighting chance in the competitive landscape.

In this edition, we'll review the four key vitals that every founder should not only pay attention to but engrave in their entrepreneurial heart.

These metrics are your compass, guiding you to safe harbors and ensuring your startup doesn't sink into the ocean.

Default Alive vs Default Dead → It boils down to a simple question: Will your startup become profitable before the runway runs out, or will it face financial demise? This stark contrast is the essence of the entrepreneurial journey, and understanding it is key to steering your startup towards sustainable growth.

To be able to answer that question, you need these 4 key metrics:

1. Current Expenses
   Monitor your burn rate closely, tracking every expense to ensure optimal allocation of every dollar.
   

2. Current Revenue

   Monetize your idea early and start generating revenue; for early-stage startups, each dollar earned is like a breath of fresh air, crucial for survival.
   

3. Current Growth
   Keep a close eye on your current growth metric; it provides a clear indication of when you'll break even if you sustain your current expenses while steadily growing your revenue.
   

4. Current Cash in Hand
   Your current cash in hand is the oxygen remaining in your tank. It emphasizes the importance of initiating revenue generation early. Each dollar earned adds more oxygen to the tank, extending your startup's runway.

Before we wrap it up, let's run a quick simulation comparing two types of startups: Default Alive and Default Dead.

• Startup A:

  • $10,000 monthly burn rate

  • $3,000 monthly revenue

  • $50,000 cash in hand

  • Growth rate is 11%
    

• Startup B:

  • $10,000 monthly burn rate

  • $1,000 monthly revenue

  • $50,000 cash in hand

  • Growth rate is 9%

Startup A is on track to become profitable within a year, and its available cash in hand is sufficient to achieve this goal. On the other hand, Startup B faces a more challenging scenario. Requiring more than the $50,000 cash in hand to reach profitability puts it in the Default Dead category, only because of a 2% difference in the growth rate.

In Short

Performing these calculations early on empowers you as a founder to create and implement a strategy focused on boosting revenue and growth, all while maintaining a low burn rate.

Our emphasis on assisting early-stage founders in establishing strong Go-To-Market foundations is rooted in the goal of achieving profitability early on.

This involves learning to build systems that generate revenue, enabling startups to grow to a stage where assembling a team becomes a logical next step to manage these established systems.

If you found these tips valuable, email us or drop a comment below to let us know. Your feedback helps us continue supporting startups like yours.

If you are ready to take your startup to the next level, this is how we can help 🏆️ 

• Hands-on Collaboration: If you are a startup founder who has initial traction and would benefit from a highly customized approach to help accelerate your startup’s revenue growth.