Funding is not the definition of success

I’ve been listening to the 2nd season of Startup (amazing like the first season), and I wanted to weigh in on the unnecessary sense of failure the cofounders felt when they chose not to keep fundraising.

“All I heard was failure, failure, failure, love Emma & Lauren.”

“Your job in the startup world — you’re looking to run these hypergrowth companies that are so magical that people are willing to pump tens of millions . . . sometimes they’re raising a billion dollars and they’re defining this new future . . . that’s the new game. That’s the sexy thing to do”

No! Ultimate success isn’t measured by how much money you raise. Neither is it measured by who you know, who you hired, what your logo looks like, or what press you’ve had.

A business’s success is judged in one main way: how much money you make from your customers. The way to earn that success: doing well by your customers and creating competitive advantage.

Any money raised, or being labeled some type of mythical animal, should be considered a means to an end. That’s how investors look at it: putting money in here gives them chance to make much more money back. They aren’t investing to make you look cool. They are investing because their heuristics indicate you’ll do well at earning money from paying customers and that they will reap handsome rewards.

So, as Mark Suster says “DAMMIT put first things first.” The fact that the cofounders decided to focus on being better at their operations and create better matches for their customers is GREAT.

If you need examples of amazing businesses that focused on revenue and profitability over the cool factor of funding, here are three:

Whatsapp was profitable after raising only $250k. It will reach a billion users within 8 years of its creation.

For the first 7 years of its life, Microsoft made compilers and was profitable without taking outside venture funding. Don’t forget that Microsoft is a company more valuable than Uber, Dropbox, Netflix, Airbnb, and Amazon combined.

John Rockefeller’s Standard Oil was created in Cleveland, Ohio. It was initially incubated out of his merchant trading house. When Standard Oil tripled their market share in 6 weeks, from 27% to 81%, they primarily used debt to acquire competitors.

The Dating Ring Founders have been incredibly brave telling their story and I wish them the best of luck continuing their success.

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