The age of performance is here, and with it are more demanding investors, smaller teams and a clear path to profitability being seen as a must-have to receive further funding.
In this article, we’ll cover actionable tips for founders navigating a shift from scaling at speed, towards prioritising performance and sustainable success. (Hint: it’s all about your people)
Whether you’ve been around the block or you’re just cutting your teeth, recent years have ushered a seismic change in the priorities of a founder.
In days gone by, start-ups were focused on scaling fast and looked to grow both headcount and revenue at pretty much any cost. But with one too many failed IPOs and countless businesses burning through their funding without reaching profitability (or even caring about it) — the tide has turned.
There’s been a serious correction in how later-stage businesses are valued. This is having a knock-on effect across the whole value chain, and the result is that later-stage funds simply won’t back highly growing, unprofitable businesses.
Today’s shareholders demand real results, not promises for future success. They expect a higher return, on a smaller investment.
So as the narrative shifts, a healthy bottom line is critical for attracting VCs who will only invest in companies demonstrating profitability or at least a solid plan to achieve it.
Without a clear pathway to profitability, start-ups risk falling short of investor expectation, meaning that the focus of founders has turned from revenue growth at any cost, to maximising performance with smaller teams.
State of play
An obsession with rapid growth, coupled with high costs, interest rates, and intense competition, has hindered profitability. Famous examples include Airbnb and Uber, which although formed in 2008 and 2009, only achieved profitability in 2022 and 2024 respectively. Another example is Babylon Health, which went public in 2021 at a valuation of $4 billion and has since declared bankruptcy.
So, let’s talk numbers. According to Emboker's data from the US, just over 2 in 5 start-ups are turning a profit, a third are breaking even, and another third are operating at a loss.
Closer to home, at the start of the year, reports from HSBC and Dealroom revealed a significant decline in the investment being made in UK start-ups.
Hitting $21.3 billion in 2023, this is a 32% year-on-year drop, and nearly half of its peak in 2021. This stems from VCs becoming increasingly risk-averse, particularly as interest rates remain high.
So, that’s (not so) great, but what does it mean for you?
Managing a change in priorities
So… Investment is tight and focused! This means doing more with what you already have.
For many founders, this means being told to grow revenue by 200% while headcount remains stable, or marketing spend drops (for example), all in the name of making the economics of the business look better.
To get to this point, you need to shift YOUR attention from growth to performance – as your path to profitability is key to not only surviving, but in securing your next round of investment, and riding off into the sunset with a wad of cash.
If you’re in a groove, changing tact can be tough. But with a few well-thought-through changes, you can put performance at the heart of everything you do.
To help you navigate this change. We’ve prepared a model to help you build a culture of high performance.
Let’s dive in.
A model for shifting to a performance mindset:
1: Define performance!
You need to define high performance in your business if you have any hope of creating it.
Is it all about results (what an individual, team, function has actually achieved), or, is it all about inputs (the execution, effort, behaviours)?
Is performance all individual results, or is it all about team results, or is it what the overall company has achieved?
The reality is, it’s probably a mix.
But the ingredients (and their quantity) will be individual to your business — and it HAS to be defined.
Way back in the day, the meaning of ‘sin’ was considered to be where you 'missed the mark'. But while hundreds and hundreds of years have passed… for founders, this is still as true as ever: It's a sin to not define what performance is in your business.
2: Assess performance!
Great definitions and words on a wall won't do you anything.
To succeed, you have to put structures in place that allow you to continuously assess how you’re performing.
It doesn’t matter whether it is little and often, or heavy and infrequent — assessing your company, team and individual performance is a must if you're to embed high-performance dynamics.
3: Craft performance-based practices!
Look, most people want to be high-performing — they just don't know how to be.
And that goes for your team too.
So, take the lead. Tell them.
Tell them directly to their face how they can be successful in their role. Developing practices, structures and tools that support people with the "how" will help you get the “what” you’re looking for.
Leadership Development - Pro Tip: A “Hands off, eyes on” style of managing leaders has been adopted by the best firms, as it maintains autonomy while supporting their development.
4: Iterate as you scale!
Once you’ve got it sussed and you’re really happy with it, chances are, you’ll have to make tweaks and develop it all over again.
Take a seed-stage business, for example. To succeed, they likely need to be nearly 100% focused on results as there's so little time to deliver. But if that’s still the case when you’re Series C, you’ll burn everyone out and inadvertently create a cutthroat culture.
Final thoughts
Things have changed. It’s no longer a laser focus on driving growth. Instead, profitability is what’s going to put you on the spot. By embracing the performance-driven strategies listed above, you can navigate shorter runways and higher expectations to secure the continued support of investors, foster high-performing teams, and navigate whatever the market throws at you.
But if there’s more you’re looking to do… You know where to find us.
Navigating the next phase of your business journey? At Foundation Partners, we can be your compass.
Get in touch to find out how we can help.