We mentioned before that we love a prudent founder, but many also laud the bold and ambitious founders who move fast, break things, seize opportunities and refuse to sit still. However, what happens when that boldness becomes a liability? Last time we wrote about the founder who wouldn’t move, but this time we’re examining the time a risk-loving founder couldn’t stop.

If you’re in a network of founders or an investor with a large portfolio, you’ve probably seen many that fit this profile. They consider expansion as proof of momentum, and collect markets like they’re Pokémon cards. Industry insiders praise them as rocket ships but peek under the cover and it’s clear that all that activity is just masking the fact that the company is running out of runway.

We’ve seen this several times, where the company’s resources are too thinly spread over too many fronts, and none of them are actually “winning” the markets they are already in. One in particular stands out, as we watched the burn rate climb while the revenue stayed shallow because nothing was given enough time to mature. Here we advised caution. Yes, it was great that there were so many promising leads in new markets, but choosing a measured approach to growth would be hedging bets by expanding in a consistent and steady way. Furthermore, our close partnership with the company’s leadership team revealed troublesome signals. The team was being stretched out over multiple markets, without a single one receiving the attention it deserved. The financial constraints at this point prevented the desperately needed new hires to support the growth. When we strongly advised putting the remaining resources towards existing markets, the founder countered with new logos that were supposed to prove market validation and justify further expansion at any cost. It was not a surprise when the company’s runway started to run out well before any of these markets had enough time to pay off.

While the risk-averse founder we supported found the market collapsed overnight, this founder had a very different problem that we spotted a mile away and watched as it steadily approached. That capital was burning at an alarming rate and the investors were getting nervous. Finally even the founder could no longer deny that they were reaching the breaking point, and fast. We helped them to rein in their spending, allocate resources to the highest existing priorities, and map out the signals (and cash in the bank) they’d need to see before exploring any additional growth.

Indeed, speed isn’t strategy, and this mirrors the problem we discussed with the risk-averse founder in our earlier piece. In both cases, the founder profoundly misjudged risk. One may have mistaken standing still for being safe, and the other confused moving fast with progress. But in the end, neither asked the most important question of all, which was really, “Is this the right time to expand, given the forces within our control and the runway we have available?” Bringing sound and objective judgment to the question of timing and diversification may sound obvious, but it’s tried and true for a reason.

Our advice to the founder reflects our broader thesis of expanding solidly in the markets with the strongest signals, with the number of markets proportional to the amount of resources available. If there are only enough resources (including cash and team) to open just one market, that is perfectly legitimate. Focus on winning significant market share. Use the revenue gained from the new market to fund the next market expansion so the company can expand from a position of strength and not simply from anxiety or hype.

And what should founders and investors be asking before they dive into the next new market?

Are any of the existing markets actually profitable yet, or are they still in their “promising” stage? (Picture the deluded parent praising little Johnny’s precious accomplishments while you stand there trying not to roll your eyes, and proceed accordingly.)

Is the company expanding because they’ve earned it, or because they are selling growth as a story?

Can the runway survive it if the next market takes twice as long and costs twice as much to expand?

Growth looks great, right until the moment the runway runs out. No one wants to be the cautionary tale.

If you’re a founder weighing your next expansion, or an investor exploring a company growing at breakneck speeds, let’s connect.