Why funding doesn’t always equal success

18 Oct · 3 min read

Why funding doesn’t always equal success

Most entrepreneurs look at VC funding as the go-to-metric for their start-up success. Sometimes, it becomes hard to blame them. 

The media will go above and beyond to feature a start-up that has just successfully raised funds in any case, make a nice headline, Isn’t it? 

All the start-up success stories that slot in that category have created the false impression that money is the harbinger of success. Thus, I’ve spent enough time within the industry to understand that's not truly the case. 

Success can be a tricky thing to define for the fact that it is different for every start-up. It could be you having multiple sign-ups within a given timeframe, maintaining high customer satisfaction rates, or even becoming big enough to be bought out by Google. Therefore, VC funding is merely a small part of the equation. 

Well, it seems that 84% of high-growth companies are not built with the assistance of venture capital.  They have 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 talented people to drive your development, and even generate more leads. It might sound good, but it's often at the expense of you partially losing ownership of your business and letting someone else decide its fate when things don’t compute as planned. 

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

One thing that often happens when founders receive funding is that they start expanding their teams beyond what they currently need. In addition to that, they start developing new product features without first validating them as they've already received the stamp of approval from investors. 

It's a sure way to burn cash and go down the wrong path. It is also one of the reasons why 90% of start-ups couldn't make it past their first year. Rather than spending money on fancy office furnishings, one can focus on staying lean and spending with fast returns in mind. 

Your reputation for excellence will be built on products, customer service, and overall customer satisfaction. It's something that one has to figure out on their own as it doesn't come along with VC funding. Quality should never be sacrificed for the sake of building businesses quickly. Yet, some businesses can raise funding consistently while letting their customers down. 

You might have a cool gadget but what if its quality is not appropriate or it doesn't address problems that your customers are facing. The above scenario will make you run your business first-hand. 

Is start-up cash necessary? Yes, of course, but it's just one part of the successful start-up journey. If you spend enough time strategizing things, then you'll be able to enhance your business and ensure its success without securing investment. 

Author: Martin Sandhu

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