Time to Value: 8 mins
Preview: Build outcome-focused teams that reduce headcount needs. Design escalation systems that free up senior capacity. Track the efficiency metrics that determine fundability. Master resource allocation when every dollar counts. Plus: The 70% confidence rule for spending decisions.
People: Building High-Impact Teams on Shoestring Budgets
I was once approached by a founder who had eighteen months of runway left. He was tasked with making a decision that would determine the survival of his company.
His team was faced with gaps in two critical roles: technical leadership and go-to-market execution.
We agreed that both roles needed to be filled as soon as possible. But how could we successfully achieve this, considering the time and financial constraints?
His plan? Hire a senior engineer and a marketing lead immediately, then wait for 3-6 months to determine if either hire is successful. However, at the end of the trial period, he’d be down to twelve months of runway with no guarantee.
I proposed something different.
Instead of just focusing on filling the roles, I walked him through an exercise I use with founders facing hiring constraints: mapping the specific outcomes you need these people to deliver in the next twelve months, rather than the job descriptions you think you need to fill.
This exercise presented him with a clear understanding of not only the current role requirements but also future role expansion. It made it easier to hire people who would provide more value than they cost, and quickly. It helped him prioritize people who can wear multiple hats without burning out, adapt as the business evolves, and contribute beyond their job description.
In funding winters, companies that succeed consistently hire for outcomes, not job descriptions.
Try this week: Before making your next hire, list the top 5 outcomes you need in the next 12 months. Find one person who could deliver 3-4 of those outcomes rather than multiple specialists who each deliver one.
Process: Operational Systems That Maximize Every Dollar
Hiring versatile people only matters if you don’t waste their time on problems that cheaper resources could solve.
During my years in business operations, I encountered an expensive problem that cost us thousands of dollars monthly: everything escalated to senior personnel by default.
Customer complaints went straight to account managers. Technical issues landed on the engineering leads’ desks immediately. Billing questions bypassed support and went to the finance directors. Our most expensive people were handling routine problems that junior team members could solve for a fraction of the cost.
The issue wasn’t that people couldn’t solve problems, but that we’d never clearly defined who should handle what first and when escalation was actually necessary.
I started thinking about problem resolution in the same way as manufacturing. You wouldn’t run a factory without knowing exactly when each station hands work to the next. But we were running operations with vague handoffs and unclear decision points. So we came up with a plan.
The Three-Level System
Level 1 handles standard questions, routine technical issues, and small billing inquiries. Anyone can try. If there’s no resolution within 4 hours, it goes up.
Level 2 addresses issues that require deeper knowledge, such as code changes, disputes, and complex problems. Someone with more experience handles these. If no resolution is reached within 24 hours or it falls outside their authority, it escalates.
Level 3 is for senior people only: major relationships at risk, system failures, legal issues. Only when the business impact is significant.
Specific Escalation Rules
Time-based: 4 hours at Level 1, 24 hours at Level 2, then escalate.
Value-based: Issues involving customers representing more than 5% of monthly revenue start at Level 2.
Risk-based: Problems affecting multiple customers skip to Level 2.
Complexity-based: Issues requiring access or authority that the current level doesn’t have.
Once we had this system, senior team time was freed up for strategic work. Problems got solved faster because they started at the right level. The cost per resolved issue dropped 40% because expensive resources were only utilized for issues that genuinely required their expertise.
The unexpected benefit: junior team members improved their skills because they weren’t being bypassed on routine issues, which allowed them to learn from them.
Try this week: Map who currently handles your most common operational issues. Establish clear criteria for what should be initiated at each level and when escalation is necessary.
Data: Metrics That Prove Capital Efficiency to Investors
Smart operations only matter if you’re measuring the right things. Otherwise, you can optimize processes while still incurring expenses on activities that don’t yield results.
I used to review portfolio company dashboards that initially appeared impressive. User acquisition is up 40%, feature velocity is high, and the team is scaling rapidly. The founders felt good about their progress, and the numbers seemed to support it.
However, when we examined their capital efficiency during quarterly reviews, many were burning through their runway without achieving sustainable unit economics. They were hitting activity metrics while missing efficiency metrics.
This taught me something I now call the Efficiency Paradox: the numbers that make founders feel successful often hide the numbers that determine whether investors write follow-on checks. In funding winters, efficiency metrics determine survival.
After managing follow-on funding decisions, I’ve seen that investors focus on three categories when capital is scarce:
Capital efficiency metrics indicate the amount of growth generated per dollar spent. The companies that received funding tracked their monthly recurring revenue per dollar of total monthly burn. Benchmark to watch for: ratios above 0.3, meaning every dollar of monthly burn generated at least 30 cents of new monthly recurring revenue.
Path-to-profitability metrics indicate when you’ll no longer need external funding. The strongest companies built models showing exactly when revenue growth would exceed expense growth, and which assumptions had to hold true. They could answer “when do you become cash flow positive?” with precision.
Unit economics metrics demonstrate that the business model is effective at scale. Look for LTV:CAC ratios above 3:1 with payback periods of 18 months or less. If your payback period exceeds your remaining runway, you’re acquiring customers you can’t afford to acquire.
Companies with strong unit economics and clear paths to profitability raised follow-on rounds even during market downturns. Those with impressive growth but poor efficiency struggled to secure capital.
Try this week: Calculate your revenue per dollar of monthly burn ratio for the past six months. If it’s declining, identify which expenses aren’t contributing to revenue growth and cut them before your next investor conversation.
Tonio’s Corner: The Resource Allocation Reality Check
Tracking the right metrics only helps if you use them to make better spending decisions. And resource allocation in funding winters requires a different mindset than most founders expect.
Cash-strapped startups face a harsh reality: every dollar spent on the wrong thing is a dollar you can’t spend on the right thing.
The problem isn’t obviously bad decisions – it’s spending on “good” initiatives that aren’t great when resources are scarce. Marketing campaigns that generate leads but don’t convert. Product features customers request but won’t pay for. Hires that fill gaps but don’t move the needle.
Most resource allocation failures happen because founders hope for positive outcomes instead of requiring confidence in measurable returns.
My filter: The 70% Confidence Rule.
If you’re not 70% confident that spending $X will return more than $X in value within 90 days, don’t spend it. This forces you to think in terms of measurable returns, not hopeful outcomes.
For every resource decision, ask three questions:
- What specific outcome will this produce in 90 days?
- How will I measure whether it worked?
- What’s my confidence level that it will return more value than it costs?
Most “good” ideas fail the 70% test. The great ones pass easily.
Try this week: Apply the 70% confidence rule to your next three spending decisions. If you cannot achieve a 70% confidence level on measurable 90-day returns, consider reducing your spend or skipping it.
The Compounding Effect
These capital efficiency challenges create a vicious cycle that kills startups in funding winters.
Wrong hires burn 3-6 months of runway before you realize the mistake. Poor operational systems waste senior team capacity on problems junior people could handle. Vanity metrics hide efficiency problems until you’re 60 days from zero. Without clear metrics, resource allocation becomes a matter of guesswork, favoring urgent tasks over important ones.
But fix one, and the others become easier to address.
Outcome-based hiring reduces the total team size needed. Smart escalation systems free up senior capacity for strategic work. Efficiency metrics reveal which activities extend the runway and which burn it. Clear metrics enable confident resource allocation that compounds returns on every dollar spent.
The companies that master this don’t just survive funding winters – they build the discipline that makes them fundable when markets recover.
What’s one insight from this week that you’ll try in the next seven days?
