Funded startups can start to treat customers as a distraction
In bootstrapped companies, he said, buyers can change the plan.
The Private Equity Podcast, by Raw Selection · From Founder-Led to Exit-Ready: How CEOs Build Buy-In, Grow EBITDA and Deliver Successful ExitsWhen asked what the startup world looks like through the lens of private equity, Brian Bishop, a chief executive in the electronics manufacturing business and a former engineering firm leader with two company sales behind him, did not talk first about products or profits. Bishop, an electrical engineer with an MBA who has spent his career in embedded systems, the electronics put inside other equipment, talked about burn rates, the monthly losses young companies accept to accelerate product development, and what that money changes.
His line, in his own words, was that in a funded startup, “the customers are almost a distraction.”
What Bishop meant is that once founders have sold investors on a technological trajectory, serving a customer can feel like it detracts from building that technology. Time given to customers is time taken from building the technology they sold. He said customer work that gets in the way of the promised path is seen as a bad thing.
Bishop contrasted that with his other startup experience, in companies that were bootstrapped, meaning built without outside investors and paid for out of their own sales. There, he said, a customer dominates and might change the trajectory. He said that shift is okay when there are no outside interests demanding the company stick to a preset path, because then the business can let buyers reshape its direction.
As Bishop put it: “I won't say they're a full distraction, but if it gets in the way of that trajectory that you've sold, then it's a bad thing.”
Questions people ask
What is a burn rate?
A burn rate is the amount of cash a startup spends each month beyond what it brings in from sales. Funded companies accept it because investors give them cash to grow faster than sales alone would allow, with the expectation that the product will later earn enough to cover the early losses.
What does bootstrapped mean?
A bootstrapped startup is one built without venture capital or other outside equity, usually funded by the founders and by early customer revenue. That means less cash to hire and build quickly, but also no obligation to hit milestones promised to investors, so founders can change direction when paying customers ask for it.
Why would a startup ever ignore a paying customer?
Investors often fund a specific technology plan, team, and timeline, and they measure progress against that plan. Customer requests that pull engineers toward services, fixes, or one-off features can slow that plan, so managers may resist them even if the customer is willing to pay.