257. Rapid Growth, Is It the Right Growth? feat. Sunny Han, Founder & CEO of Fulcrum

VCs push founders for growth. Founders push their teams for growth. But is all growth the right growth? 

About Fulcrum
Fulcrum applies modern technology to manufacturing processes, helping makers focus on their craft and grow their businesses. The innovation of American manufacturers is critical to a better world, and Fulcrum aims to revitalize the industry with automation software.

About AVL Growth Partners
AVL Growth Partners, founded in 2009, is the leading fractional Finance and Accounting firm supporting organizations in pivoting from growth to scale. AVL brings an experienced team of CFOs, Controllers, and Accountants to your organization, delivering transparent, strategic actions for short and long-term success. Transform your financial approach affordably with AVL, supporting companies coast to coast - get to know AVL Growth Partners at avlgrowth.com. (Sponsored)

About SpringTime Ventures
SpringTime Ventures seeds high-growth startups in healthcare, fintech & insurtech, and logistics & supply chain. We look for founders with domain expertise, forging a path with a truly transformative technology. We only invest in software-based businesses in the USA. We bring a people-focused approach, work quickly, and reach conviction independently. Our initial check size is $600k. You can learn more about us and our approach.  

Transcript

Rich: 0:01

Let's continue with the story from Sunny Han, founder, and CEO of Fulcrum. We're going to follow him through 20, 21 and 2022 and the fundraising environments and the lessons that he learned during the boom times and the hard times. But first, founded in 2009, AVL has fueled the success of over 1200 early stage companies. Specializing in raising capital, M&A, financial modeling, scaling, and bringing financial transparency and a disciplined approach to the companies they work with. AVL works seamlessly as a member of your team and has the experience to support both VC-backed and bootstrapped companies. Head to AVLgrowth.com and explore how they can be pivotal to your growth.

Sunny Han: 0:48

Somebody said, I think it was Andy Grove. He was talking about how all CEOs and founders are optimists. That they're always going to be optimistic about the future.'cause he was asked man in, 2000 or in any crash, every single CEO is out there saying, oh no, it's great. How could all these smart people be wrong? The quote is something like, you can't be a founder and a CEO if you're not, at least somewhat optimistic. We don't want pessimistic founders and CEOs. Like, The system's working pretty good. And yeah, sometimes you have systemic problems where everybody messes something up, but that optimism is probably the fuel that is required to start something crazy and, push it forward and keep going even though you have setback after setback after setback. I think that exact same fuel that allows you to be resilient also gives you the ability to overspend on things that aren't efficient. I like to think of myself as a scientist. I like to think of myself as a mathematician. Well, a real scientist would not have deployed all that capital in such a short amount of time without testing it. But the one thing that really is also true, is that time is worth an enormous amount of money. And then even if you're slightly inefficient, if you take 10 years to build something versus two years, there's an incredible amount of value in that. You don't have an infinite life, we're all going to die at some point in time, there's competitive forces, timing is really important, but I think that's what happened. We produced an enormous amount of product, we grew by an enormous amount, we 4x'd within six months, then we 3x'd again within nine months, but it wasn't the right kind of growth. It was all over the place. It wasn't focused on any niche. The way that we grew, had a piece of technology that everybody wanted. They still want it. We didn't realize how big of a product we had to build for each sub niche. We sold a bunch of people, a lot of them are still with us, but the amount of work that we had to do to get what was a lot of percentage growth, but in terms of the size of the market is such a small sliver of the market, that force multiplier of dollars deployed to satisfy such a small sliver of the market, that was where the discipline lacked. That's another weird thing. In the moment, you see this growth. And all the investors are saying, Holy crap, you're great. You're one of the top companies we've invested in. You're telling your team, you've got to build all this stuff. And there's all this chaos. And you say, well, maybe this is just how it happens. Every other company says it's super chaotic. But really, no one knows your business better than you do. I think that's something that I didn't understand. I was trying to chase benchmarks or am I doing well and thinking externally. Once I started thinking internally, it became really obvious. Oh, actually, we should have deployed the capital slower. We should have hired slower. We should have chosen a smaller niche. We should have built a whole product for them. And actually, smaller niche, even if it's not that exciting, maybe it's only 8, 000 customers, that's still a 200 million a year ARR business that can capture 30 percent of it. No investor's going to sneeze at that. And you have to build 95 percent less product, you're going to be able to get there with less burn. In retrospect, I know that. I learned that lesson, but my brain just wasn't thinking like that. There were all these factors and potential pitfalls in the future that I just optimistically expected to solve, and we did solve them. I don't think that I had the knowledge or the intuition to understand how to calculate the costs. of that solution. I do now. I think better than before. I'll probably make a bunch of mistakes and it'll be embarrassing that I said that I know how to do that now, but, there's a lot of information that I have now. The value of focus, even though I've heard Steve Jobs talk about it, all these famous people, you don't really learn what lack of focus looks like until you have to manage the sea of chaos that comes out of the excitement of uncontrolled growth. And then the resulting work that comes with it.