Funding without True North
A NOTE ON : CHASING VISION, NOT FUNDS
For well over 2000 years, navigators have known how to determine both direction and latitude (their position north or south of the Equator) by using the North Star (Polaris).
When you are facing Polaris you are always facing north, and between the Equator and the North Pole, the angle of the star above the horizon is a direct measure of the degree of latitude.
In ancient times, navigators measured the angle of Polaris at their home port . To return after a long voyage, they only needed to sail north or south to bring the star back to the angle of home port — then turn left or right and “sail down the latitude,” keeping the angle the same all the way.
Like explorers, who were looking for unexplored lands and new trading routes, today’s entrepreneurs are looking for unanswered questions (problems to solve) and new ways of doing things. The north star in a startup’s case is — VISION.
Having a vision and a plan to execute it does not necessarily mean everything will go smoothly.
Christopher Columbus was on a quest to find a new route to Asia by sailing westward from Spain. He had planned to reach Asia through this new route which would be a hassle free route for trading and set up a base there for continuous trade. He convinced the King of Spain to fund his voyages (a total of four). He, by mistake, reached the East Indies and named the natives Indies.
The important point to note is, he was not the first European explorer to reach the Indies but he was instrumental is starting an era of European colonization of the New World that lasted for centuries.
He definitely had a plan and the north star to help him through the route. Once he did reach a place, oh boy did he make sure he made most of it!
Now think of a startup scenario — Say you are a startup founder and lack a vision for your company for the next 10 years. But you have a great product demo and you do manage to raise some funds to take that product to market. Now think of a situation where once you get the product to the market, you realize the timing couldn’t have been worse. There is stiff competition from bigger companies delivering a better product to your audience. You are obviously doomed and devastated. You didn’t see that coming, did you?
Now imagine in the above case, if you were driven by your vision of 10 years where you have dedicated your company to solve a problem. Well, I believe you can still go about new ways to do that. Because if a big company comes along to dominate a route, you can go about creating your own route to your preferred destination.
The point to take — you should know your preferred destination.
Personal experience
I have been extremely lucky. Not because my first startup (Innoz) did really well in revenues and raised 3 M in Series A funding, but because it got busted after a year it raised the funds(and all this before I turn 26). The learning curve in failure is a highly exponential one.
I remember after raising the fund, I met a CEO of a company who had completed Series E funding and asked him on some advice on how to go about spending the money. He said — “Make your decisions as if you haven’t raised money.” Obviously I did not heed to his advice and understood the value of that statement much later.
When you have enough money, it is easier to take decisions. When you have no plan and a lot of money, you are tempted to take a lot of decisions. Now the catch is, all these decisions might not necessarily help your business. Of course you will learn a lot but you will also end up wasting a lot of time in trial and error.
The point to take — just because you CAN do something, does not necessarily mean you SHOULD!
Surprisingly this is not a rare phenomenon especially in the Indian startup scene. Because the scene is in its early stages a lot of investors may get excited on the short term plan of the product and fund you to develop and market it. I have come across a lot of entrepreneurs who have got funded because of the hype surrounding them or their startups rather than them having a clear vision and a plan to execute it.
Money is a great thing. It is perhaps one of the most important things for a business. But money can be a problem too when the entrepreneur gets stuck due to lack of direction and ends up wasting a lot of money and time trying to do too many things. Also, funding always comes with a catch. Many a times, the entrepreneur is forced to return the money in case the startup loses its focus. I can say that from personal experience.
So, what do we do to overcome this ?
Only go for funding when you know exactly what you want to do with the money. Just because you have funding doesn’t mean you can solve a great problem.
You can solve a great problem when you have — a problem to chase + plan to do about solving it + a team to execute the plan.
How do we choose a problem ?
In terms of choosing the problem, it could be something that concerns you as a user or because of your expert knowledge in an industry. If both the above cases do not help, you need to ask yourself and your co-founders some hard questions.
What are you passionate about? What are your core strengths? Where do you see yourself in the next 10–20 years?
With the help all the answers from the above questions you can identify a vision for your company that helps its people (team) get better at their core strengths and helps them keep doing what they are passionate about (mission).
At my second startup (Springr), I was offered small angel rounds of funding which I had to politely decline. Why? — because i was still making my plan. Its okay to say NO. Once I made my plan, it was so much more easy to reach out to people and make them believe in what I believe. You automatically become more confident because you know exactly how much money you need and for what.
I had always thought having money is good. But until recently I realized, a lot of money with no vision is not a great problem to have. When you have less money, you are left with no other choice but to refine your model and better your plan. Too many choices lead to too many decisions and too little time to do anything substantial for a purpose.
So for entrepreneurs with no funding, congrats this is the best time for you to formulate your plan. You have little choice which helps you keep your focus.
Imagine yourself 10 years down the lane, where do you see yourself? What do you see your company doing? What industry do you want to be in? What are the questions in your industry still unanswered?
For entrepreneurs who have got funding but little idea what to do with it. Your funds are safe in the bank. Its ok to take your time to figure out your 10 year plan. You have to ask the same questions as above. But you have a tougher task since you have more choices.
My mentor once told me, you can only create magic with love and pain. We all obviously get the love part, but constantly need a reminder on the pain part. :-)
Happy planning,
Abhinav