Finding product-market fit , raising venture capital, optimizing for revenue growth (even at the expense of the bottom line), increasing valuation, and pursuing funding rounds until an IPO or eventual sale to a consolidator.

This was the playbook followed by most startups over the last 20 years. But the playbook is now being questioned.

A convergence of factors is leading many entrepreneurs to take a different path. Among them: global inflation has reduced the appetite for risky assets; with less capital available, startups need to seek financial sustainability sooner; and new technologies, such as artificial intelligence, allow for faster and cheaper MVP development, as well as automating much of the back office, reducing the need for capital.

Furthermore, many entrepreneurs have witnessed, in recent years, several cases of successful exits where the entrepreneur's cost-benefit ratio simply wasn't worth it. Too much pressure, long hours, little freedom, and in the end, when the pie was divided, their slice barely stood upright.

The result is that we are seeing more and more startups seeking only a first (and only) round of funding in order to quickly reach the break-even point and, from there, grow on their own.

This movement has been called seed-strapping and was well described by Alex Lazarow , who nicknamed these companies "camel startups".

Although treated as a new phenomenon in the startup ecosystem, seed-strapping is perhaps one of the most traditional ways of creating companies.

Some of the most iconic companies, such as General Electric, a union of the magnificent Thomas Edison with the great investor JP Morgan, were built from the combination of an entrepreneur with vision and technical knowledge with a capitalist partner willing to bet on the idea.

The same applies to most restaurants, shops, and other small businesses that we frequent in our daily lives.

What happened is that, at some point, the venture capital market became so "sophisticated" that the traditional logic was perverted. The goal ceased to be profitability and became sale, creating a multi-layered system that decorrelates the valuation of the business from its P&L. With astronomical investments and low ownership, at some point in this history, investor ceased to be synonymous with partner.

What we are seeing now is a return to common sense, back when 1 plus 1 still equals 2.

Advantages of seed-strapping startups

Kiip, a human resources management software and my second startup, was born from the seed-strapping model. Conceived within Superplayer, my first business, we received an initial capital injection to develop a quality product, and from then on, the focus shifted to acquiring clients and achieving financial sustainability.

One of the great advantages of this path is that the startup can dedicate itself entirely to satisfying customer needs. Startups that depend on fundraising need to spend an enormous amount of energy attracting investors: applying technologies that are currently trending (even if they don't add much value to the customer), awards, demo days, countless meetings, deck adjustments, creating FOMO, etc.

At Kiip, we are very clear about the distinction between "bigger" and "better." While in venture capital logic both are synonymous—the greater the number of clients, funding, and valuation, the better—our vision of "best" is measured from the customer's perspective and assessed by indicators such as NPS, CSat, and Churn.

Another great advantage is in terms of culture and cost management. As Jason Fried, founder of Basecamp, would say, startups that grow based on round after round, "fly in a world without gravity." Focusing only on revenue and being able to neglect costs seems great, but it risks becoming a habit. Having a focus on results from the beginning creates a team concerned with effectiveness (knowing how to prioritize what really generates impact) and efficiency (doing more with less).

Although shifting from a boom-oriented model to a profitability-driven model may seem like a simple flip of a switch, it involves profound challenges in mindset, culture, and organizational structure.

Investment is not the villain.

Investment itself is not the villain. Investment as a business model is.

Almost every company starts with costs preceding revenue, to a greater or lesser extent: infrastructure, product development, marketing and sales force, etc. Initial investment to arrive at a product that solves customer pain points and scale to cover fixed costs is fundamental for almost all entrepreneurs.

It's also possible that the return on investment from customer acquisition, the famous LTV/CAc, is so positive that the company decides to attract a new round of funding to accelerate expansion. Or, often, the opposite can happen, and the time calculated to achieve financial sustainability becomes longer than planned. In all these cases, investment is an extremely important tool for entrepreneurs.

The problem arises when the center of gravity shifts from the customer to the investor. The company starts optimizing (and allocating too much time) to appear attractive, instead of maximizing customer value. This is in addition to all the previously mentioned problems that excess capital can cause.

Built to last

There was a time when "investor" and "partner" were synonyms, when "Built to Last" was seen as a common goal, and when "bigger" and "better" were clearly distinct things.

With the development of the venture capital market, this logic was lost. What we see today, with phenomena like seed-strapping gaining strength, is less a disruption and more a return to the origins. To the time when every startup was as important as the real pain it solved for its customers and its value as strong as its P&L.

The feeling I carry while building Kiip in this way is one of solidity. The certainty that generating maximum value for clients, coupled with firm financial management based on effectiveness and efficiency, will take us far. And the belief that, as Jim Collins showed us in the past, the best way to be the "biggest" is to be the "best" consistently for many, many years.

*Gustavo Goldschmidt is an entrepreneur. He founded Kiip, an HRTech company designed to disrupt the human resources software market, and Superplayer, which develops and licenses content apps for over 120 companies and 1.5 million people. Superplayer was globally accelerated by Google, received investment from the Movile group, and is currently invested in by Sinch, a leading Swedish cloud communications company worldwide.