Don’t raise money for the wrong reasons
Off late, the number of Quora questions focused on ‘quick hacks at raising capital’ have started troubling me.
And to be honest, if you have found yourself an investor who has the mindset of the ‘Take my money’ guy, these are the 2 immediate things I highly recommend you do next:
#1. RUN. RUN LIKE THERE IS NO TOMORROW. RUN FOR YOUR LIFE
The most your investor has to lose is some money that he will give you for the business. You have your career at stake here. Your life, your dreams, your passion.
#2. STOP WHATEVER YOU’RE DOING AND GO FIND A UNICORN
I mean it. And no, I don’t mean unicorn in the startup world terminology. I mean the actual unicorn. You know, the ones that shoot rainbows out of their ass.
Do you know what are three most unlikely things to happen in this universe (in order, #3 being the most probable of the lot)?
#3. Finding a unicorn — Surprised? Well, in all honesty, it is the easiest of the lot.
#2. Finding an investor who doesn’t need a lot to get wowed — You may find them, and if you do, you know lady luck is on your side. Ditch everything, and go after #3.
#1. Getting fired at, and escaping without a scratch — Only three people in the world can do that. Jules and Vincent from Pulp Fiction, and — I am assuming — Clint Eastwood.
This was the most recent question I came across.
This is what we have come to?
Trying to find quick and dirty ways to raise capital, for — what it looks like — anything that would get me funded. Doesn’t seem to have a lot of meat on what the person is doing, does it?
And that is why it troubles me.
I answered the question — after sleeping over the decision of whether I should or not. Might have been bit harsh in the first part of the question, but the second part is what I want to focus on. That’s what I did there, and that is the intent of this current piece as well.
SO. YOU’RE AN ENTREPRENEUR. THATS NICE
I mean it — in all sincerity. The world of today badly needs entrepreneurs, innovators, creators. And we are fortunate enough that we have so many of such great people around. Think Airbnb, Uber, iphone, fitbit, Tesla. None of it would have been possible had the breed of grit loving entrepreneurs not been around. But a lot of us today have been misguided. Maybe because of the media frenzy, maybe because some of us have come to believe it is easy, maybe because some of us feel like you need money to succeed. Some I have come across who even feel without external capital, you just can’t start. Some who consider raising successive rounds as an indication of sure-shot success. I don’t know what’s wrong, but there definitely is something that smells funny here.
If you are an entrepreneur, you would need to do countless different things, and you will need to do a lot of them right. You will make a lot of mistakes, but you will learn from them and then start doing it better. So I won’t focus on giving you a bunch-load of Do’s and Don’ts. There are just five things that I would advise you to remember.
#1. SOLVE A PROBLEM. FIX SOMETHING THAT NEEDS FIXING
Or at least cater to a need.
You should never start a business for any of these reasons:
- for the sake of starting a business
- for being your own boss
- to call yourself an entrepreneur
- to get rich; something that you think you can’t do in your regular job.
If you do, chances are, you will fall on your ass — repeatedly, and with quite some force. Save yourself that pain. Do something meaningful. We all want money, and the money will follow. Just do something people are willing to pay for. And remember, nobody likes to pay for shit. So you got to solve a problem. Most of the self made millionaires and billionaires actually made money this way.
Richard Branson started a whole new journey selling plane tickets for a plane he did not own, in the name of a business he hadn’t yet started, at a time when he hadn’t thought of doing something similar. All he saw was a bunch of people stranded waiting to catch a flight back home, and he started offering them seats on a hired chartered plane for a fee so that he didn’t need to bear the full cost of chartering the flight.
So, let us take a leaf out of the book of some of the most successful people in the world and start solving problems.
#2. GET SOME CUSTOMERS
Businesses are in the business of making money. Period! Always remember that. Write it down. Get it printed and framed and hang it where you can always see it. Anybody who tells you otherwise is lying to your face.
Sure, for your business to be considered remarkable, you would probably need to be at a stage where you have tens of thousands, maybe even hundreds of thousands of paying customers. But you never start there. You just can’t. Nobody can.
It always starts with the first few. Identify those whose problem you are solving and sell your product to them. You have your first few paying customers.
That’s validation, and then the interactions these first customers would have with your product will also help you in:
- Making your product better
- Achieving the product market fit.
#3. BUILD A GREAT TEAM
Don’t just cram the team up from grads and postgrads from the premium schools around the world, just because you think that will add credibility and weight to your case when you go pitch to an investor. Know why you are building a team, and get onboard people who fit in with that vision.
At the same time, don’t go about hiring just anyone because they are more ‘affordable’ to the business. Think of your company as your car; you won’t buy spare parts you can’t trust just because they are cheap, will you? If you won’t take that chance with your car, why take that risk with your business? Do you really not love it?
Build the team:
- that’s right for your business
- you can trust
- who can take the business to soaring heights
But do build a team. Also—and this is important — ensure that their efforts and hard work are well compensated. If not today, then eventually. Don’t cheat your team. They put their faith in you when nobody else would. Never forget that. Remember. If you want to walk far, walk together. So yeah. Build a team.
#4. GET SOME MORE CUSTOMERS
Use the money you made from the first few customers into getting some more. Start identifying what kind of marketing communications are working with your targeted audience base and what isn’t. It is critical.
#5. LET US RAISE SOME MONEY & THEN SOME HELL
You don’t need to raise money to start a business. You raise money to scale a business — to grow it from 10x to 100x and 1000x in a much lesser time than it took you to grow from x to 10x.
You also don’t need money to build the product, you need money to make a ‘better’ product.
I started an e-commerce business without having a website, forget a mobile app. Because I didn’t need it on day 1. I needed orders, and I had 5 different routes to ensure that. The website would not have helped me get orders, how I reached out to my consumers would. So I focused on generating orders. We ended up processing 7,000 orders without having even so much as a landing page or any social media presence.
Businesses are not built on top of products or mobile apps. Mobile apps exist to support and help grow the businesses they represent.
Let’s create value. Make things people would come to love. Make things that cater to real life problems of your consumers. It doesn’t matter whether the problems are big or small. What matters is how you fix it. Let’s make an ecosystem of amazing businesses. :-)