Stay calm and default alive
We don't optimize for short run revenue growth, but we do make sure we have enough money to never feel dependent on future fundraising.
If we average 5% MoM growth, we are default alive (i.e. we'll become profitable before we run out of capital). If we average 7.5% we'll hit $100M by the end of 2026.
Maintaining a strong financial position helps us optimize for long term revenue growth. For example, we've removed products and revenue for long-term gains.
Rule #1: Never have to fundraise... and fundraise if all the following are true:
- It will speed us up.
- We can use the money effectively.
- The partner would improve our board.
- The increased chance of success offsets dilution.
- It reduces stress.
How do we spend it
PostHog grows by shipping, whereas most software companies grow linearly with the number of salespeople they hire.
The advantage of our approach is that it's more efficient – $1 spent on product will forever improve things, unlike investing $1 in cold calls. We can easily choose to be profitable if we just sit default alive and let revenue grow "automatically" based on the product we have already shipped.
The disadvantage is that scaling an engineering team is, in our opinion, harder than scaling a sales team. Since engineers' work very heavily overlaps, there is more complexity to getting this right. We may not be able to grow beyond a certain rate, no matter how much we spend.
The final disadvantage is that it's harder to predict how fast we'll grow (compared to a company that grows by hiring salespeople with targets), so it takes more thought and often requires more faith!