Not a day goes without some news about a startup getting funded, whether it’s a new kid on the block or an existing unicorn getting another round of breather from billionaires from the east, they news galore.
But for the lesser mortals (read as not studied in IIT/IIM) repeated witnessing of headlines about fund raising and full page ads on national dailies by such funded startups creates a misnomer that getting funded equals success. It is not.
Here are four reasons why getting funded from an institutional venture capitalist is not the end game.
Solving capital constraints is not your sole purpose
Business have been thriving for thousands of years, entrepreneurs have raised capital from borrowing to reinvesting profits to leveraging customer’s money or even selling family silver!
Getting funded is step one of your entrepreneurial journey, not the end of it.
Raise money to start/run your business and not the other way around where you make business plans in sectors that are currently getting funded.
No wonder we had more startups providing plumber services than we had plumbers in a pin code
VCs invest for their ambition, not yours per se
A bank and VC have one thing in common, they are in business of money, they lend/invest someone else’s money (deposits / LPs) in your startup to multiply their principal.
So, to protect their assets and investments, it is only fair if they push you to ‘do things’ that yield high growth in a manner that you may otherwise not do.
Any startup running purely on a funded model is living on borrowed time.
Focus on take-off, not a longer runway
Capital for a startup must be like a runway for aeroplanes, it must help it take off quickly, not taxi forever.
Agreed that some ventures need enormous capital before it lifts off, like telecom or wind energy, but if you are a tech startup building SaaS for large enterprise, the faster you get to revenue generation mode, the better your prospectus of growing and thriving at scale.
This essentially means you weave a revenue model at formative level of your product and not as an afterthought when the plugs are pulled by your VC.
We have enough startups that have fallen off the wayside when the next round of funds did not come through.
Don’t fall for the hype, there’s elegance in bootstrapping
As the famous maxim goes, follow the trend line not the headline, it may be too late to enter a sector that’s currently getting funded, as a mentor for few leading accelerators, I’ve painfully come across entrepreneurs asking me tactics to incorporate in their business that will get them funded!
Phew, it is relatively easy to sign up a large enterprise as a customer by solving their problems to generate revenue than to suck up every investor in an industry event by shoving business cards or worst, blast cold emails and spam then desperately.
If there’s ingenuity in your idea, conviction to collaborate with right minds and perseverance to create value than valuation, then pitching to VCs must be the last in your to-do list.