© jeffreybroer.com

Running out of money is not a failure reason

Running out of money isn't a valid failure reason.

While making the preparations for the next version of the Postmortem Conference about Startup Lessons Learned, I sometimes see founders writing: we failed because we ran out of money. Now those founders should get causation and correlation right.
If your startup is running out of money, your burn rate is too high or your solution not viable enough to get additional funding, but no money is never the reason for failure.

Startups run out of money because they work too long on things users don’t need (what ever happened to product market fit?), the runway was calculated too short (that’s not the moneys fault, but opportunism when raising your previous round), they couldn't raise another round in time (you started too late raising you nitwit), hired the wrong (too expensive) team (you were there when you hired them!), etc, etc. There is always an (execution) reason why you cannot get additional funding, it's an effect, not a cause.

Funding on its own is definitely not the holy grail, and you can do so much without funding, look at bootstrapped startups like Basecamp, Braintree, BigCommerce, A Small Orange… No outside investments, they “revenued” their way up by building a business, a product people wants!

In current investment climate (it looks like there is more money available than ever) running out of money isn't an option if you can show traction, profit, valuable IP and/or have an extraordinary (but affordable) team.

It’s easy to get seed rounds, and harder to get A-series, and that’s not because there isn't any money, but because in an A-series the requirements of getting funding are different. Seed is to get to traction, profit, solution to a big enough problem, the next round you better have that, otherwise you are just out. Not because of lack of money, but because of execution.

Do you have an unique startup lesson learned, either it is a pivot, a failure, a hard fought success or an investment lesson we can learn from? Come and share it at our conference this October in Hong Kong? Use the Request for Speakers to send in your story, we are looking forward to it!

Originally published at jeffreybroer.com on August 26, 2015.