A company in our portfolio raised financing, grew slowly, and concluded that it needed more sales capacity. The founders hired two experienced salespeople. Six months later those two had made thousands of customer contacts and held hundreds of meetings. Buying customers: zero.
I sit there as an investor and board observer. When I learned the numbers, the plan was to give the salespeople six more months. At the end of those six months, cash in hand would have been zero euros.
The founders already knew it was not working, and the plan was still six more months. They were afraid of making the decision.
Premature scaling looks like a shortage of salespeople
The company was succeeding and failing in the same six months. Its existing customers kept expanding, and the founder closed two new customers himself. In the language of my book they have strong Value Proof: customers receive measurable net value after the full cost of adopting the product.
They do not yet understand their Buyer Proof, the evidence of who pays: which economic buyer has a costly problem and moves budget to solve it. Employing salespeople without articulated and proven Buyer Proof is premature scaling. The founders saw slow growth and read it as a shortage of hands, so they added hands.
We do not know yet why the founder's buyers buy and the thousands the salespeople contacted do not. The customers the company has won so far are of a type the founders would rather not build on, and nobody has written down what separates a buyer from a polite meeting. Until somebody does, a salesperson has nothing to repeat. A struggling salesperson is then evidence about the company, not about the person.
Six months without a sale is a verdict on the sales model
An experienced sales leader will object. New salespeople need ramp-up time, B2B sales cycles are long, and six months proves nothing.
There are always early adopters who buy. Two experienced people made thousands of contacts and held hundreds of meetings, and nobody bought. Zero sales over six months shows that the sales model is not repeatable. The clearer the Buyer Proof and Value Proof are, and the better they are articulated, the shorter the ramp-up period is.
The research points the same way. In 2011 the Startup Genome project studied more than 3,200 high-growth technology startups and attributed 74% of the failures among high-growth internet startups to premature scaling. That study is fifteen years old and covers internet companies. A newer one is closer to this case. Lee and Kim, in the Strategic Management Journal in 2024, used 6.3 million job postings from more than 38,000 US startups and treated the first sales or manager hire as the moment scaling begins. Startups that began within twelve months of founding were 20 to 40% more likely to fail, with no matching gain in successful exits. The authors do not claim causation, and the extra risk sat almost entirely with companies that did not run experiments.
Neither study describes this company. Both describe the move it made.
Founders know they scaled too early, and fear keeps them paying for it
In my book I write that most startup mistakes begin with fear, usually fear of missing an opportunity. Here the fear worked on the exit from a decision, and it had three parts. The founders feared they were reading the analysis incorrectly. They feared missing customers and sales, which were not materialising. And they feared admitting that the hiring decision had been a mistake.
All three fears had the same remedy on offer: six more months.
The more money you raise, the longer premature scaling survives
My partner at Gorilla Capital, Risto Rautakorpi, says: "The more money you raise, the more likely you are to fail." A full account keeps a team from hearing what its customers are saying.
My version after this case: the more money, the bigger the mistakes, and the harder they are to admit and correct. I have seen this multiple times across 220+ startup companies. Scaling early usually scales uncertainty, and it is one of the most common death drivers I see.
I have written before about hull speed, runkonopeus: capital, headcount and hours are the engine, and what the company has actually proved is the hull. This company bought a bigger engine. If you are raising now, know what the money should accelerate before you take it. If the answer is sales, check whether anyone other than you has ever closed the same kind of deal the same way.
A sales hire is a test only if it cannot empty your account
Hiring a salesperson can be a legitimate test. A test should not drain your capital reserves. Rule 1 in the book says never make a commitment larger than your proof, and Rule 3 says that if you cannot name the missing proof, you are guessing. Two experienced salespeople for twelve months, ending at zero cash, is a commitment.
Where scaling before proof is the right call
Some markets reward land-grab. Where network effects or distribution dominate and speed matters more than early economic clarity, scaling ahead of proof can be the right call. Public-sector selling also needs an adjustment: procurement cycles and budget windows delay visible proof, and a long sales cycle is not automatically weak proof.
If you claim one of those exceptions, name exactly why, what replaces the missing proof, what would falsify it, and when you return to economic proof.
Stopping it took one analysis and a few days
I pushed for a re-analysis and for a decision. The analysis needed nothing new: the activity the hired salespeople produced against the customers who bought, where the sales that did happen came from, and the cash position at the end of the extension.
The founder decided to cut within a few days. He is selling himself again, and the company's cash no longer has an end date.
If you have no investor pushing you, the instruction is the same. Make the hard decisions. Everything this founder needed was in his own numbers before I asked.
The best decisions are typically the ones that hurt most.
More scars than trophies.