Why Fund Raising is a bad idea for your startup.
“Wait. What? What did you just say? Raising funds for my startup a bad idea? Are you out of your mind? This guy is sick.”
This must be the first reaction of most of you reading this. And you are very well right. As all that most of us have read and learnt about entrepreneurship and startups is based on the stories published here and there glorifying the act of raising funds. Almost every business book also suggests that finance is essential to start a business. For the young management students coming out of good old business schools where leadership is “taught” rather than “shown” that too on a powerpoint presentation using examples of entrepreneurs who “made” it, “built” their business and are now successful, raising funds seems not only the essential but also the very first point of starting a business. So, yes I understand the reaction. Not your problem.
This is a part of all great plan rich has conspired to keep ordinary people the way they are.
Make it sound so difficult and complicated that not many even dare to try. Confuse them with something way out of their reach. Let them debate about something which is not even important. And while they do, let us make money and rule them forever. New model of feudalism and slavery, as I see it. But its okay. Coming from a non stop slavey of almost 1000 years, I understand its difficult to see through this and create a new reality.
But its super dangerous for a first time entrepreneur if all you are focused upon is how to raise funds to take your startup off the ground. I have a case here, which I want to present to all of you. Why I think it’s a bad idea for you to raise funds for your startup? And my points are below:
1. It blurs your focus:
Having funds at your disposal allows you the luxury of adding “nice to have” things to your product and business. And it’s a natural tendency of a human mind to have more. If you say adding “value ads or nice to have” things to your product is a good thing, compare Apple products with Microsoft or any other brand. A classical example of simplicity. Unless you are Steve Jobs, it’s impossible to have that mindset with such a simplicity and clarity. One day maybe you reach that stage (its damn difficult though, I have read the man extremely deeply), allow yourself to be “forced” to keep it simple.
Being resource constraint pushes your mind onto only the most important aspects of your startup business.
You are forced to cut out the flab and essentially keep only the most vital parts. While you may be thinking the “nice to have” things will make your product sexier, it actually complicates the whole thing for a consumer. On top of it since you “added value” you start thinking that you “deserve” to be respected and bought. While the reality is that your customers don’t care about what you think. And since you can afford all this, you are not desperate enough to listen to them and fix your stuff.
2. It spoils you:
Bill Gates said, “Success is a lousy teacher, it seduces good people into thinking that they can’t fail”. And having failed many times after being reasonably successful, I can tell you that the man is so damn right.
Having money in your pocket has some kind of saintly aura to it. It produces some kind of generosity.
You are all of sudden being less demanding in negotiations of all sorts. And even before you realise, you are paying way more than what you could’ve negotiated for. The worst part to it is that there is no end to this. Having no money in your pocket makes you desperate, activates your mind to find out more & better ways to get what you want and get that cheap if not free. I have negotiated things and convinced people to work for me free at times only because I simply couldn’t afford to pay more. Having no resource and still wanting my thing always brings the best in me. All of a sudden I am listening more, I am more humble and less arrogant. And I am more solution oriented. The eagerness to do it right the very first time is more, because you can’t afford to make mistakes and screw up things. Thats the way starts do and should work. Apple still does it today. And hence its called the largest startup on the planet.
3. It takes you away from your passions:
Remember my last article where I talked about “fix it” instead of “replace it” mentality. Entrepreneurship is essentially “fixing things”, “creating solutions”. And every great business ever been created in the history has been a classical example of solving a problem. So you look around and see a problem, create a solution for it using available resources.Then you realise there maybe others also facing the same problem, you go tell them the solution you have and ask them to pay you for the it. It’s that simple. And the only reason you could do it because it “mattered” to you. You were “concerned” about it. You are “passionate” about it.
You don’t solve personal problems by doing a ROI or a feasibility analysis of them. You do it because it matters to you.
Take example of Apple where these guys just wanted a better computer for themselves, Facebook where all Mark wanted was to be in touch with his friends, Google – all Larry and Sergey wanted a better search engine for themselves. Now this can only happen if you are resource constrained. Why on earth otherwise would you go through the grind of hit and trial, sleepless nights and convincing strangers about how your solution can help their lives? You make an instant connect with their problems because you “have” faced the same problems. You talk to their pains, their hearts, and their feelings because you yourselves have been thought the same.
But, the moment you take somebody else’s money, you are essentially going to work for them.
And I don’t care what they say while funding you, they are professionals in the business of increasing their money. They don’t care about your dream or solution or passions or you. For them ROI is the only matrix and if its not 100X returns faster, they would want you to start fixing some other problems which offer 100X returns faster. They call it “pivoting”, I call it “replace it” instead of “fix it” mentality.
I am not saying you should “never” accept funding, but certainly not when you “need” it, do it only when you “want” it. When you are strong enough to stay on your mission and passions that you can tell your VC to shut up if they try to deviate you from your path, because you don’t need it anyways. No “seed” funding, do bootstrapping instead. Create a prototype, gain critical mass generate profit and then more forward.
If life gives you lemons, make lemon juice.
I have many more reasons to believe this, but these were the top 3. I leave other reasons for you to discuss and share. Do comment and share if you think its worth. I would love to hear your views as always.