STARTUP WHATEVER!
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STARTUP WHATEVER!

Funding Fallacies

Just Because It Can Be Difficult to Attain, Doesn’t Mean Funding Should Be Viewed as a Victory (or even as Validation!)

I’ll come back and finish this later (hopefully), but, quick thoughts:

First Question to Ask Yourself: WHAT KIND OF FUNDING IS THIS?!?

Is it a “RAMP Round” or a “RESCUE Round” or a “RESEARCH [(and Development (R&D)] Round”?
[NOTE:
I just made those up — because I have #AnAlliterationAddiction — but the point is that not all rounds of funding are equal, not all rounds of funding are for the same purpose, not all rounds of funding are AS crucial to success/failure for the startup or AS likely/unlikely to be good investments for the investor.]

(Note to self: Try to find the blog you already wrote about this like 3 years ago!)
[Note back to self: I found it — here’s the link:
Ramp Round vs. Rescue Round]
(Note to self: Um, thanks, but why didn’t you just delete the original “note to self” and just insert the link?)
[Note back to self: Oh, yeah, I guess I should have done that.]
(Note to self: Yeah, you should have. And you should also stop these “notes to self” — it’s kinda weird, ya know, since we’re the same person!)
[Note back to self: Yeah, you’re right. Or I’m right? Or we’re right? Anyway, ok, I’ll stop.]
(Note to self: Thanks.)
[Note back to self: Your Welcome.]
(Note to self: *You’re)

(Note to self: Try to find the blog you already wrote about this like 3 years ago!)
[Note back to self: I found it — here’s the link:
Ramp Round vs. Rescue Round]
(Note to self: Um, thanks, but why didn’t you just delete the original “note to self” and just insert the link?)
[Note back to self: Oh, yeah, I guess I should have done that.]
(Note to self: Yeah, you should have. And you should also stop these “notes to self” — it’s kinda weird, ya know, since we’re the same person!)
[Note back to self: Yeah, you’re right. Or I’m right? Or we’re right? Anyway, ok, I’ll stop.]
(Note to self: Thanks.)
[Note back to self: Your Welcome.]
(Note to self: *You’re)
[Note back to self: “You’re” an idiot.]
(Note to self: I know you are but what am I?)

Just Because It Can Be Difficult to Attain, Doesn’t Mean Funding Should Be Viewed as a Victory (or even as Validation!)

  • Getting excited about what you’ll be able to DO with that funding is great! But I think too many entrepreneurs tend to celebrate the funding milestone itself, just because “Startup Culture” tends to treat funding as a big win or a badge of honor — which is a mistake, in my humble opinion.
  • $100 from 100 customers is SIGNIFICANTLY more validation than $100,000 from 1 investor (in my opinion)
  • If the funding will legitimately help you grow the company to a significantly higher value, then great! And, hopefully that’s exactly what it’ll do, otherwise, why did you take it? (Actually, don’t answer that.) Because the “un-sexy” parts of funding that nobody talks about are:
    — you just got diluted (you now own a smaller % of the company than you did yesterday — which is definitely not a bad thing if/when the company value increases, it’s just maybe something to be thinking about / motivated by, rather than celebrating)
    — the bar just got raised (as far as how much revenue you need to generate before it becomes profit, as far as how much you’d need to sell the company for to make everyone happy, etc.)
    — you now have someone else to answer to (or at least to keep updated regularly on progress)
    - (Note to self: add more later)
  • If one person writes you a check, the only validation that should truly give you is that you convinced one other human being that you might be on to something… but, the realities are:
    - that shouldn’t really tell you anything (one way or the other) about how close you are to Product/Market-Fit
    - you have no way of knowing how much they value that money. If they’re so rich that they wipe their ass with hundred dollar bills, then they might view that “investment” the same way you view a $5 bill to a homeless person because you feel bad for their situation…
    - [Also, much less likely, but… many angels or VCs have spoken/written about how they sometimes invest in a business because they like the entrepreneurs, and want to establish a relationship so they can work together in the future — so for all you know, they DON’T believe in this business and they’re already thinking ahead to when it fails and they’re hoping they can get you to run the B2B SaaS idea they’ve been sitting on for a while…]

WOW!
Um… Sorry — I have no idea why/how this column turned so pessimistically ugly and dark! I kinda just started typing and next thing I knew I was basically yelling “Your funding don’t mean shit!” to some hypothetical entrepreneur who might one day be reading this column! Sorry about that! :) Ok, time for bed — 1am blog-writing might not be the best idea :)

P.S. Actually, I think I DO know where that came from. I think I subconsciously flashed back to the reaction I had when I saw a SnapChat story a few years ago from some friends popping a champagne bottle in celebration after they’d received their second round of funding… So, why would that bother me so much?? Well, because I was the source of their FIRST round of funding which they had kinda blown through without much progress to show for it :(
#Awkward #ProbablyShouldntHaveWrittenAboutThat #WellAtLeastIllFindOutIfMyFriendsReadMyBlog

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