Positioning for Optionality

I can’t believe we are only a few short weeks until Expo West.

If you want to connect in person at the show, please hit me up, and it would be great to meet. Also, if you are at the show, please don’t forget to RSVP to our party HERE.

It is a shorter version of the On-Shelf newsletter this week, but a topic that I have been thinking a lot about lately.

I launched my company in 2019 and since then I have talked to thousands of brands, made a lot of connections, and met many people that I would now call industry friends.

The last few months though have brought up some difficult conversations with founders that I have worked with and came up with since starting WeStock.

I felt like over the years I was building my business side-by-side with them, celebrating their wins with them, and now having very real talks about how they are planning to wind down their business.

I have talked about the current state of the industry and the investor landscape, but all the pontification is now being felt with news almost weekly about another brand or a founder I know personally, planning to close their doors.

There is very little a brand can do when they get to that point. If you have 2-3 months of runway the options are limited and you are going to feel the pressure to find a soft landing, but that timeline isn’t realistic to do so and put you in a spot with zero leverage.

This brings me to the question I have been asking myself...

Why do we not position for optionality and optimize our time and network to sell our business from day one?

Something that I have found interesting during the fundraising periods of WeStock, has been that when an investor asks you what your end goal is with the company, you really should only answer it in one of two ways.

• We are solely focused on growing the business and if we take care of that then we will all have a great outcome.

or

• Our goal is to become a unicorn and although we might be open to selling, our main focus is an eventual IPO.

You have to give them a sense that you are going BIG or that you're so busy and focused on the business that the end outcome will happen because you're focused on execution.

You never hear from a founder that they are building the company for optionality or that they’re scaling, but also simultaneously failure-proofing the company. Meaning they are building for multiple outcomes.

The reason you don’t hear this is that investors need 100X returns to return their funds. They don’t want 5-10 companies hitting 10x returns, they 1-2 big returns. You have to pitch them on the fact that you can be one of the two.

So when the investment is secured it makes it only natural to feel like entertaining any other option other than unicorn status is a failure.

I think founders can do both and that it shouldn’t be perceived as a negative if they are balancing growth and optionality.

Even if your daily focus is on the big vision, would founders be better served to spend 5% of their time each month optimizing for various outcomes?

I have spoken to so many founders over the past few months looking for acquisitions and soft landings as they close their business, but how much easier would these conversations be if they were having them a year ago when it wasn’t even in the realm of immediate possibilities?

As a founder, spending 5% of your time growing your network, speaking with co-packers, and larger CPGs, and consistently positioning yourself and your brand as attractive can’t hurt your business.

The fear is that taking even a fraction of time away from the immediate needs of the business lowers the ceiling of the business, but I would push back that the only thing it would do is lift the floor.

Your potential outcomes would be much better even if you didn’t hit your expected sales number or ran out of capital because those conversations would have already been in place and they would have happened when you were talking from a position of strength, not of desperation.

I don’t think optionality and growth are decisions that have to be viewed as one or the other. I think as founders we are wired to feel bad or that we aren’t giving it our all when we do anything that isn’t tied to growth in the moment.

I also think that a certain level of negligence could be assigned to founders who are not constantly having conversations that could lead to future outcomes if there wasn’t this negative perception around it.

Founder guilt is a real thing.

We always feel like we should be doing more and that any time spent away from the company is bad. Spending a small percentage of your time networking and setting up options for your business long term should not be something that we feel guilty about. It should be a prerequisite.

Thanks for reading and I will see you next week!