Imagine you’re a billionaire starting a new company. You’re happy to bet your entire fortune on it. As a result, capital is no constraint. How fast should you burn money?

You probably wouldn’t use the generic startup math of dividing your available capital by 18 months and burn $55.5 million a month — though it would be fun. So if capital is no longer the currency that determines how fast you go, what should?

It’s confidence, not capital, that should be the currency of acceleration at a startup — no matter if you have a million dollars or a billion dollars to burn.

Confidence is often misunderstood by those who feign it. It is not bluster or arrogance. It’s not “trusting your gut.” Competitors raising big rounds of funding shouldn’t change your level of confidence one way or the other unless they’re doing exactly what you are. Glowing press coverage helps team morale, but it shouldn’t color your assessment of readiness to scale up.

It’s also important to note that venture capital interest is a terrible proxy for founder confidence. VCs have different structural incentives than founders; in an easy money environment, placing a big bet in a hot category, backed by a good enough team, is a job well done for a VC. Remember that they have a portfolio of companies, you’ve just got the one.

So what should drive you to scale up spend? There’s no perfect answer, but if you consistently see strong customer response to your product, marketing delivering more qualified leads for less money, sales channels becoming better instrumented and more efficient, LTV expanding with product improvements and lower churn thanks to your customer success team, you’re probably in good position to accelerate investment.

Too many startups feel pressure to spend money based on hope, not confidence.

Compounding successes at all levels of the business should provide data points that give you the determination to plan out a more ambitious trajectory. The requirement for confidence shouldn’t be mistaken for conservatism. Startups need to take risks in order to thrive, but they should be calculated, not capricious. There is a limited speed any company should go based on what they’ve learned to date about their market and offering.

If you have a high degree of confidence that you can turn $1 into $2, or $10, you should invest immediately. If you don’t have that confidence, you should spend time, but limited capital, to build it. Unfortunately, too many startups feel pressure to spend money based on hope, not confidence.

Authentic growth

Startups appreciate in value through growth. This isn’t just another VC mantra: even bootstrapped startups or public companies become more valuable when they grow faster. Two $10 million companies where one is growing at 80% and the other 20% will be valued very differently. Even if the slower-growth company is generating some limited cash flow and the high-growth company is burning within reason, the high-growth company will usually be worth much more.

So given that growth drives value, why shouldn’t every startup grow as quickly as it possibly can? With capital in hand, why not spend to generate more growth and therefore more value?

Capital without confidence shouldn’t dictate a startup’s acceleration.

Shattered confidence kills startups

Companies that misuse capital as the driver of acceleration cause irreparable harm to confidence. When a company over-accelerates and misses, it takes a painful amount of time to observe the mistake, admit the mistake, correct the mistake and rebuild confidence with the team and investors that you won’t repeat the mistake. Eventually, the company must undertake the inevitable process of taking a huge step back to try to rebuild that faith. This requires going much slower than a similar company that has never faltered.

If you spend a small amount of money on a pilot and it fails, you’ve helped home in on what your product should be, and you’ve not burnt any credibility with your team or investors. Spend 10 times that amount and you’ll have no more confidence in what to do next, far less credibility and a diminished balance sheet. Worst yet, the next time you want to lean in on a major initiative, the lack of confidence of key stakeholders will likely overwhelm what may well be the right decision.

Three startup currencies: Confidence, credibility and capital

Companies create value by compounding learning and therefore compounding confidence in their future. As confidence grows, companies will earn credibility inside the management team and with investors. Once you have both, it usually gets easier and easier to find the right amount of capital needed to fuel that confidence. Confidence is the most important currency, followed closely by credibility, and only then, cash. By way of contrast, driving up revenue artificially by burning capital with low return on investment is not sustainable and does not create long-term value. This will ultimately damage confidence and credibility.

You can buy confidence with capital, but it’s rate-limited and there’s no benefit to scale

Arguably, there should be little difference between the acceleration of two competitive companies that have the same amount of confidence but radically different capitalizations. If both are early-stage startups and one company has $10 million in cash and the other has $1 billion, they should spend their money with the same principle in mind: what does it cost to build confidence that our most important experiments are working?

Authentic confidence is the only real winning weapon at a startup.

For a company with a million dollars, this may mean hiring a single inside sales rep to test out a direct channel based on some early successes with a specific type of customer. A company with a billion dollars will likely make the mistake to open global offices to meet international demand, without first validating that they can make that single inside sales rep successful. In both cases, the confidence of the management team and their ability to execute should be driving the decision, not the available capital.

Credibility is earned, not purchased

If you spend like you’re headed to $20 million ARR and only hit $10 million ARR, your business is in a very difficult position. Not only because you sustained large losses, but also because you’ve damaged confidence in execution — team members and investors won’t believe in the company’s ability to achieve the target the next time it wants to hit the gas pedal hard.

Conversely, If you confidently hit $10 million in sales and have sight lines to $20 million, you will not struggle to raise more money to achieve your goals. The more the management team meets its goals, the more confidence grows and the pace of acceleration can be increased. Compound confidence and acceleration is boundless.

One of the biggest mistakes of the startup community, fueled by an overcapitalized venture market and an overhyped argument about winner takes all market dynamics, is the belief that capital is a weapon that will win the startup wars.

Authentic confidence is the only real winning weapon at a startup. Capital can fuel that weapon, but when used without confidence, it usually becomes a weapon of self-destruction.