I’ve written before about the concept of flow in a personal sense, but it’s been on my mind recently as it applies to companies as well.
My friend Venkat Rao posted a great piece on startup positioning back in 2010 that captures the concept of company-level flow very well:
“It is the controlled, but not deterministic, crossing of a threshold beyond which the business suddenly seems to come alive and ‘work.’ The emotion changes from depressed to excited. The energy changes from languid to explosive.”
Most startups never achieve this transformative, state-change moment. Talented teams can spend years grinding, pushing, and hustling — and even make it to a positive exit — without finding the magic.
But there is a special kind of joy and effortlessness in companies with flow that is a joy to behold.
I’ve been lucky as both a founder and investor to have experienced this feeling a handful of times in the two-plus decades and dozens of companies I’ve been involved with, and like US Supreme Court Justice Potter Stewart famously said of pornography, “I know it when I see it”.
As an investor whose job it is to supply the Series A venture market with high-quality companies, I’d also suggest that the best venture investors are a lot like Potter Stewart when it comes to spotting companies with flow.
There’s so much good-quality seed-stage product on the market right now that Series A investors can afford to be incredibly choosy. Most high-growth companies will need venture capital to achieve market dominance, and the venture market can afford to wait until prospective winners show their colors before they open their wallets.
One of the smartest guys I ever worked for — albeit many, many layers in the org below him — was Jim Barksdale, who at the time was CEO of McCaw Cellular / AT&T Wireless. One piece of advice he offered me that stuck with me these past 20 years was this:
“Find a parade and get in front of it.”
Seed-stage entrepreneurship — and investing — is messy work, full of uncertainty and hardship (it’s also incredibly fun, which is why so many of us choose to do it anyway). But for early-stage companies to make it through the needle’s eye of Series A+ venture, founders need to understand that the bar isn’t just good effort and solid metrics.
Great Series A rounds come together like butter when a company finds its flow.
Your job as an early-stage founding team is to “make a parade” that smart growth investors can get in front of and help lead to the next level. If you aren’t feeling the flow, your dream investors probably won’t either, and you’re better off staying heads-down until your parade is clearly underway.