Funding Doesn't Always Equal Success

A lot of entrepreneurs look at VC funding as the go-to-metric for their startup success and it’s hard to blame them.

The media will go above and beyond to feature a startup that has just successfully raised funds - after all, it does make a nice headline, doesn’t it?

All of the ‘startup success stories’ that fit in that category have created the false impression that money is the harbinger of success. I’ve spent long enough time in the industry to know that is not truly the case.

Success can be a tricky thing to define as it is different for every startup. It could be you having X amount of sign-ups within a given timeframe, maintaining high customer satisfaction rates or even becoming big enough to be bought out by Google. The point is, VC funding is but a small part of the equation.

Don’t believe me? Well, it turns out that 84% of high growth companies are NOT built with the help of venture capital. Why? Because they’ve understood that getting a round of funding is not the end road to success but rather an opportunity to create it.

Funding can provide resources to build a great company, hire some really talented people to drive your development, and even generate more leads. Sounds good, but that’s often at the expense of you partially losing ownership of your business and letting someone else decide its fate when things don’t work out as planned.

One of the main reasons people become entrepreneurs in the first place is that they seek independence - that’s not something you’ll get once investors are involved.

What often happens when founders receive funding is that they start expanding their teams beyond what they currently need. Even more, they begin developing new product features without first validating them as they've already received the 'stamp of approval' by investors.

That's a surefire way to burn cash and go down the wrong path. It's one of the reasons why 90% of startups don't make it past their first year. Rather than spending money on fancy office furnishings you should focus instead on staying lean and spending with fast returns in mind.

You reputation for excellence will be built on products, customer service, and overall customer satisfaction. It's something you'll have to figure out on your own as it doesn't come along with VC funding. Quality should never be sacrificed for the sake of a quick build yet their are still businesses who are still able to raise funding consistently while letting their customers down.

You might have a cool gadget but if the quality is not quite there or it doesn't really address any of the pains your customers are facing, you won't have to worry about tweaking it - you'll run out of business first.

Is startup cash then necessary? Of course, but it's just one part of the successful startup journey. If you take the time to strategize you'll be able to better position your business and ensure its success with out without securing investment.

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Martin Sandhu
Founder – martin@nuom.co.uk