It’s a common assumption: more capital will solve growth problems. Bigger budgets, more hires, faster expansion. But in reality, if the growth engine underneath is inefficient, capital doesn’t fix it, it accelerates the inefficiency. Worse, it sends a signal to external stakeholders like investors or potential acquirers that the fundamentals aren’t sound. Money is a multiplier, not a fix.

It’s fine to have some inefficiency through a period of accelerated growth, but a lot of the waste is unnecessary and easily avoidable.

Public markets use ROIC as a standard metric for accountability. Growth leaders should do the same, commercial leaders need to ask “what return are we generating on invested capital?”. 

The Illusion of Capital as a Solution

Raising or allocating capital feels like progress. It creates the appearance of momentum: more headcount, bigger campaigns, increased ad spend. But without fixing the fundamentals first, capital simply magnifies weaknesses.

We’ve seen companies raise heavily to build sales teams before they’ve nailed positioning or built a reliable pipeline. The result isn’t growth, it’s ballooning costs.

Raising capital is rarely the issue, allocating it effectively is. 

What a Broken Growth Engine Really Looks Like

A broken engine doesn’t mean zero growth. It means growth that is fragile, inefficient, or unsustainable.

Take the company that pours millions into paid demand generation while conversion rates are falling. Or the firm that leans on its founders to get every sale over the line instead of an efficient training program for their sales reps. 

The top line might still be growing, but that’s a surface view. But in practice, resources and capital are being misallocated. The interconnections between positioning, CAC, LTV, sales process, and margin aren’t understood. And when one part of the system breaks, the whole engine underperforms.

How Capital Accelerates Inefficiency

This is why raising money without fixing fundamentals is so dangerous. Every euro raised and spent compounds the problem:

• More spend on ineffective campaigns = bigger losses.

• More sales hires without a system = wasted headcount.

• Faster expansion with weak economics = higher burn, lower valuation.

Investors spot this quickly. They know when capital is fuelling growth versus fuelling inefficiency. In the worst cases, leaders burn through resources and still face stalled growth, leaving both the business and its shareholders exposed.

The Right Order: Fix, Then Fund

Capital has its place and it’s a great momentum builder, when the commercial engine is stable. Focus on those fundamentals and it will be an accelerant to your growth.

Leaders need to test before they spend. Think of it as a commercial stress test. Just as banks stress test their balance sheets, CEOs should stress test their growth systems: can the business absorb twice the demand without breaking? Can your unit economics handle pricing pressure from key suppliers? Is CAC sustainable at scale?

Only when the engine passes the stress test does it make sense to fuel it with capital. Otherwise, you’re just accelerating towards a wall.

Key Signals Leaders Should Monitor

If forecasts are consistently close to actual outcomes, that’s a good sign the growth system is predictable. If they’re wide off the mark, more capital won’t solve it, it will only amplify the gap.

Certain signals should be non-negotiable before raising or deploying capital:

- CAC is stable and predictable, not just at a blended company-wide level but broken down by channel. Leaders need to scrutinise the inputs.
- There are multiple, reliable demand channels, not over-reliance on one.
- Scaling doesn’t break margins; operational control grows with revenue.
- Revenue is not dependent on systems, not individuals.

These are the markers of a business ready for an injection of capital. Without them, the risk of misallocation is too high.

Practical Steps for Leaders

So what should leadership do in practice?

• Run a commercial audit before any capital planning. Diagnose what’s working and what’s broken.

• Align leadership on priorities. Decide what needs fixing before scaling, not after.

• Treat capital as fuel for a proven engine, not as a cure for a broken one.

This discipline not only protects internal resources, it also strengthens the story you tell the market. Investors and acquirers reward efficiency. They penalise waste.

Conclusion

Capital doesn’t solve broken growth systems, it exposes them. Leaders who raise financing and misallocate capital before fixing their commercial fundamentals are shooting themselves in the foot. The sequence matters: fix first, fund second, scale third.

ROIC provides a standard measurement, the stress test to showcase the discipline. And the reward is growth that is not just faster, but stronger, more efficient, and more valuable in the eyes of the market.