Ok. Let me be frank. This article is more of an outburst than gyan.
Not that I’m some great startup guru or anything, but in the past few months I have been discussing concepts of various entrepreneurs to give my 2 cents on what will be required to make it work.
Most discussions at some point of time come to the inevitable like question – “Will my concept get funding?”
This question really frustrates me, not because it’s a stupid question, but because I too asked the same question not very long ago and two startups later I now realise how useless the question is.
I’ve listed the assumptions which are the root cause of this question. Please feel free to add more.
Myth 1: I have a great concept, now show me the money (a.k.a Funding)!
Most founders (and when I say most I mean 90%) think having a great idea is enough to get funding. Unfortunately this may only happen if you are Steve Jobs, Guy Kawasaki or at the very least have some past entrepreneurial experience.
In reality, investor money comes in only after you have proven that there is a market for your product. The best ways to prove this is to actually come out with what is popularly called an “MVP” and make it live. If it works and you make money everything else will fall in place.
The time required to test this depends on product to product. Just ensure you have enough money during this period + some buffer. Don’t go around running for investors for this. It’ll be a big waste of time both for you as well as them. This is called runway money and usually it’s done by those close to you, since they will be the only ones who can trust you at this stage.
Myth 2. “Funding will guarantee success” OR WORSE “I got funding = I’m successful”
Success has got nothing to do with how good brilliant the idea is or the fact that you got ‘Funded’. It’s more about the effort, drive and direction of the team has. A good entrepreneur can make an average idea make money and a bad entrepreneur can screw up the greatest of ideas.
Funding and success are totally unrelated. Funding is neither an indication nor a prerequisite for success.
Want proof? Both my startups Qpeka and My Cute Office are performing much better than many of the well funded competitors. And the reason is simple. We focus on the problem and not the funding.
Myth 3. I have investors who are interested (=ready) to invest in my venture
What bugs me the most is the statement, “I already have an investor who is ready to invest in my venture.” In most cases the reason they say this is because some investor asked for a copy of the presentation. There is a vast distance from being interested and actually investing. It’s like me saying I like a girl and then actually marrying her! Just please don’t make a fool of yourself by saying this till you have received a term sheet.
No investor will say they are not interested. But that does not mean anything. The only time you can say they are ready to invest is when you have signed a term sheet with them. (Even after that there is a risk they may not invest)
A few more tips:
- The best source of funding is revenue from the business itself. So have a great revenue strategy in place. Revenue-less startups like Whatsapp are really rare and need a fanatical fan following to become successful.
- Always remember “Money always chases those who need it the least!”
- Funding is meant to remove bottlenecks which block your growth not to pay your salaries.
- No one gives a shit about your “idea”, execution is the key.
- Get a good mentor who has successfully started up and don’t ignore what he says. Most probably he will be correct.
- If you run out of runway, take the saner option and bail out. In many situations it can save you a lot of heartburn.
- Always focus on building a good team even if it means giving out a lot of equity. 40 % of a $ 1 bn company will always be more than 90% of $ 1 mn company.
So long story short, don’t chase the khayali pulav of “Funding”. If your business is successful, investors will chase you. But making a successful business is extremely difficult and that’s the reason funding is too.
asha chaudhry
abhishek – it’s 10:50am and this is already my fav read of the day!!
love how you have just put it out there!
to me, this is what makes our community so special. real entrepreneurs sharing seedhi baat facts of what goes on!
keep believing in yourself and keep building abhishek.
and yeah, outbursts are healthy and add immense value for the rest of us! your tips at the end are precious! thank you 🙂
Saikat Sengupta
Abhishek,
I am not sure if you follow this blog or not. If yes, good, if not please check it – you would love it; there are so many success stories that support what you wrote. Also there are some books available there which further reinforces what you said.
I have seen this attitude in many people, as if having an idea is all what needs to become an entrepreneur. Even, when I pointed out that a similar business already exists and asked how their business is going to be different, they said nothing which means they never did a competitive analysis.
Funding the business during the initial few days is difficult, but not impossible. There are many businesses in India which were bootstrapped. FusionCharts is bootstrapped. There are many others as well.
Hardik Shah
Just to add to point 3 – an investor will never say a NO to you. But they will keep dragging till they can fire the gun from somebody else’s shoulder. And tomorrow, if your venture becomes huge, they do not want to be shamed saying that they had an option but missed the bus.
Manish Sisodia
Abhishek,
There would be a lot of articles dealing with the same topics, its so much like the movies … many of which might have similar plots but some are great hits and some damp squibs, its the way the plot is treated. Your article was crisp, to the point, maybe story was old but treated with freshness and gripping to the end.
It was good to read that Qpeka and My Cute Office are performing well. Keep it up.
Kudos.
Puneet Nirogam Aggarwal
Hi Abhishek,
Lovely read. For the last 3 years, ever since I moved to Bangalore, I was confused to seek funding, or to remain bootstrapped. Recently I met Alok Sir, and I asked the same question. He replied “Banks are liquid with cash, utha lo chahiye to. Jab koi investor aayega to le lena. Jyada socho mat. Agar Chahiye to bank se uthao. Agar Zaroorat nahi hai to Investor ko Sir pe bitha ke kya karoge”. Well that is purely in my case. But just wanted to mention it here.
Why ? Because I have seen entrepreneurs who think more about funding, and less about execution of their own idea. Because I have seen startup events which sell out, just because they have a “Funding” theme.
I chose to remain “Happily BootStrapped”.
Thank you again for this rant. It will help a lot of us.
asha chaudhry
puneet,
“Happily BootStrapped” is a great title for an article. likho bhai!!
Alok Rodinhood Kejriwal
Also research how many of the Fortune 500 Companies in the world were ‘funded’ when they started 🙂
Puneet Nirogam Aggarwal
Jald Hi. Being a non-writer, I still face the Writer’s Block.
O Lord, Give me the strength.