“We are running out of money in 2 months.”
I have companies come into my office every day now, portfolio companies and others who tell me when they are running out of money. The problem is that they stare at it. They believe that this attacking enemy will come and they will cease to breath. Anytime they are within 4 months of death, their breathing is a little tighter, their stress is a little higher… and rightly so.
In the 1–10 person startup, this fear can be blinding, and all consuming. The problem with staring at it, is that it eventually happens.
Most people believe that startups die because they run out of money. That is not the case. Startups die because they lose faith in the idea, because they think that their amount of money is a validator of progress.
I have numerous examples of companies running out of money, but still believing and pursuing the mission against all odds and pulling themselves out from the sub-zero.
I do understand that the success and failure of companies is largely resulted on their balance sheets and income statements, but the startup in the first couple years determines that outcome.
Every founder knows what it feels like to have their back against the wall and almost out of money. The best creativity comes when you are out of money.
The difference between the startup who does run out of money and shuts down the company and the startup who runs out of money and keeps going is that the founders who run out of money and shuts down the company, felt that the money is what determined their success. The money is a mental game, your goal is to solve a problem and at the beginning that means building a product.
If you are passionate enough about the problem you are solving you will figure out how to generate money from the solution. If you are not, you will stare at the end of the money, as your end of days.
In order to get out of this stress bubble of money staring:
- Talk to peers about the situation. Ask what they have done.
- Figure out if your product is far enough along to generate cash.
- You may have to lay off a few people so that the company can survive longer.
- Try a different business model with the same product.
- ACTUALLY CHARGE FOR YOUR PRODUCT.
