Screw fundraising, that’s not what startup is about!

I would like to keep this post interactive, as you read further there are few questions that I have asked. Simply have their answers in your mind ready before you proceed. Sounds cool?

To begin with, my first question…

Think about 5 successful StartUps?

Do you have them in your mind? All 5? Or at least 3?

Great, now let’s try to figure out what is success? So here my second question..

At which milestone would you consider a startup to be fairly successful?

• Seed Funding
• Raising Series A
• Raising Series B
• Break-even with invested money
• Profit making
• Exit
• IPO

Hope you have made a choice from above? I created similar poll on several startup groups on Facebook. 70% believed Profit Making to be a factor to be ‘fairly’ successful. 15% believed break-even is enough.

So hardly anyone believes successful raising of funding as a criteria of success, I was personally pretty pleased with the results. So going back to my first question, the 5 successful startups that you thought about, are they Profit Making? Or have they at least broke even with invested money? Or do you know them as successful only because of their valuations after Series A, B, C, DEFG?

The answers would depend upon your choices. Of course one could argue that some of the biggest startups in India, though running on losses are still huge and making profits shouldn’t be the criteria for judging them. But that’s what many thought about TinyOwl and Peppertap a year back.

Now that we have some idea about what we most think about building successful startups is all about, let’s ask few questions to ourselves again answer the questions before you continue to read the para that follows. This part is only for people who are running startups right now.

Is your product/service ready?

This is heart of a startup, it can be a mobile app or a logistic setup. With great marketing you can get a user to use your service once, with cashback he might use it a second time, with flat discounts the third time. The rest of the times he comes to you would only be for the product. Anyways this question was just for the heck of it.

Is your investor pitch ready?

Now do you get why the first question. Quite often startups have an investor pitch deck ready before their product. Does this make sense? What is your startup about that you cannot start without funding? Would you advise your relatives to put money on startups that haven’t even finished their product yet? Ideas could be great but when people try to execute them, the resultant product could be crap. Worse is that if it’s a tech startup and you have techies as founders why would do you need to raise money before building product? Is it because there is easy money up there for grabs? Are we building startups so that we could raise money and pay ourselves many times the salary that we would earn at our jobs? This is not entrepreneurship! I find articles like these so annoying. Nothing against this startup, their product is kickass. But these articles promote raising money at idea stage, which gives a wrong impression to young entrepreneurs who think there is easy money to raise. Which in turn changes the focus of an Entrepreneur from building a product to raising funds. That’s why I hate blogs that glorify fundraising, how many times have you read articles on startup blogs that said startup XYZ has broke-even with its investment?

After that blabbering, onto my next question,

Are you generating revenue, and how?

Great if you are generating revenue. Just got to make sure that to earn every Rs. 10 you don’t need to spend Rs. 20. If that’s the case then you need to quickly sit to build your investor pitch deck. If you are not generating revenue, you are still a bit far from success, as we had learned earlier the criteria for success for many is profit or breakeven, and both need revenue generation.

Do you have your revenue model ready?

Of course you would if you have your pitch deck ready. That’s like a mandatory slide in pitch deck. Revenue model is something that only looks good on slides. If it’s possible to generate revenue the way you predict it would be, then shouldn’t you at least try it out with a few people right away?

Do you have your roadmap ready, if you raise money right now?

20% Technical, 40% Marketing, 30% Salaries and 10% Sales…

We have no Idea when we fill that slide which says what we are going to do with the money, but just know that the sum should come up to 100%. Though we don’t know the distribution in percentage, we do have a fair idea what we are going to spend it for like hiring, building new stuff, new functionalities, expanding and blah blah. How many of it will result in immediate revenue generation? Or you don’t care about revenues because you have a roadmap for your fundraising as well? That impresses lots of investors, because some of them are not even bothered if you are successful after taking their money; all they are bothered is will you be able to raise more money after their funding? But do you really want to play this game of raising rounds? Or do you want to build a startup that makes money while solving a problem?

Do you have your product roadmap ready, if you don’t raise any money?

Great if you have one. If not, you are probably willing to give up on Entrepreneurship if you are not able to raise money. Isn’t it weird, how we are prepared for a hypothetical scenario where we have raised money and not for the reality where we don’t have any money right now?

In short, all I want to say is screw fundraising, raise money when you need to scale. You can most of the time get a proof of concept of your idea without raising money. Also remember it would be a successful proof of concept if you are generating revenues.

I have preached a lot here, but I, myself have been guilty of many of these. I know this is the wrong way to build the business because I have made those mistakes.