Editor’s note: Levi King is the CEO and co-founder of Creditera and was previously president and co-founder of Lendio.
Last summer, Creditera closed a Series A round of financing with Randy Komisar at KPCB, yet we were loath to announce the raise. We finally announced it recently as a footnote to a more important announcement, that we launched a free, three-bureau credit-monitoring product for small businesses, which will increase the likelihood they succeed and thrive. The big news was about them, not us.
Pre-EBIDTA fundraises often turn into celebrations of mediocrity. I get it, your team works its ass off in the face of gnarly adversity and risk-taking for months and months. You get enough “traction” to close some financing. Awesome. Time to book a b-celebrity musical artist, buy a bunch of alcohol, and invite everyone you know to hang, because it’s party time, baby! We’ve made it!
Except for one nagging fact: In the grand scope of commerce, we really haven’t accomplished jack.
Let’s get real and admit to the real “accomplishment.” We convinced the investment community to pump millions of dollars into our business. But wait, those millions of bucks represent other people’s money, which is inherently easier to put at risk, and it was invested with the VC and LP fully understanding that you’re probably a losing bet. Damn, talk about knocking us down the ladder; a wee bit painful, eh?
That’s a single, not a homerun, and certainly not a World Series Championship.
What are the risks of over-celebrating fundraising by the team? A destructive focus on vanity metrics. I have a hard time not rolling my eyes or gagging when someone asks me how many employees we have or how big our office is. What does that have to do with whether we’re creating something scalable, that users love and engage with, and yields profitable unit economics (let alone EBIDTA)? (If you’re a founder wondering what the hell EBIDTA is, you should hang out with a seasoned small business owner for a few days.)
Celebrating vanity metrics stems from natural human behavior. Building a company is hard, and real metrics are hard to come by. We want to celebrate our hard work, find meaning in it and stoke the fire of hope that we’re going to succeed. So we look around, find and desperately seize on vanity metrics so we can feel good about ourselves to reassure ourselves that we’re going to win the fight. That our efforts aren’t in vain.
Understanding the motivation behind the accidental worship of vanity metric gods helps founders avoid the death trap, but still feeds the human craving to find meaning in their work. There are other metrics that can be celebrated even if they aren’t the best metrics – incremental improvements in net promoter score, engagement, growth and unit economics.
We can celebrate the incremental progress gained in our march toward nailing the real metrics. An awesome, sustainable culture depends on our ability to avoid vanity metric worship.
At the end of our monthly company meeting, after the setting in of excitement generated by talking big about vision and mission, along with celebrating the month’s accomplishments, I always end by reminding our team that it’s the collective tiny actions measured over extensive periods of time that lead to the grandest outcomes.
The focus is on excellence in the next line of code, the next phone call from a customer, the next member newsletter, the next paragraph of in-product content, the next A/B test, etc. All tiny actions, inconsequential in isolation, measured in the consumption of minutes and hours, become the collective representation of success over time.
Vanity metrics won’t get us there; they’ll ruin us. I dare you to overshadow your fundraise on social media, with real news focused on KPIs that will ultimately mean you spent your investors’ money meaningfully. Swallow hard. You can do it; you’re a champion.