Raising money for your startup can seem exciting. It seems as though it’s the first step in what will eventually become your Zuckerberg-sized concept you’re going to blow up toRead More
The post 4 Scenarios Where Raising Money For Your Startup is a BAD Idea appeared first on The Entrepreneurs Library.
]]>Raising money for your startup can seem exciting. It seems as though it’s the first step in what will eventually become your Zuckerberg-sized concept you’re going to blow up to the moon.
These investors want to give me money? …Well of course they do because my company is totally destined for greatness.
Okay, you may not get this absurd with your internal monologue, but in all likelihood it’s the feeling you’ll get when you get a “yes” in a room with an investor.
That said it’s not all sunshine and rainbows. In fact, if you can get creative and scrappy and bootstrap your company for as long as you possibly can prior to raising a round of funding (IF you have to raise one at all), you’re going to get a WAY better deal when the time comes, AND you’re going to be a lot more likely to use that money wisely.
As a business mentor for MentorMojo, I spoke on this topic in more detail here:
Don’t get me wrong – I’m not anti-VC money. In fact, I’m a huge advocate of it under the right circumstances.
Here are 4 instances where raising funds may be a very bad idea for you:
If you’re a new founder, chances are you’re a combination of smart, hungry and clueless. We all were – and it can be a profound asset for us in the early days. As in anything, no matter how predisposed you may be to success, there are going to be some hard lessons you need to learn before you’re good enough for the next level.
I’ve had the privilege of living among a few different first-time founders who just raised a round of venture capital, and rather than allowing themselves to fail on a small scale by trying to leverage some creative financing and/or bootstrap things before upping the ante, they instead burn $1 million or more because they’re simply too green to know when they’re making good, informed decisions, or when they’re simply throwing money at a problem they’re not yet intellectually capable of solving on their own.
Most founders start their first business – or even their first couple – because they had what they believed was a good idea. Every time they think about it, they get so fired up to the point where they take the leap, and soon begin investing time and hard-earned money to make it real.
What they soon start to realize is that an idea is only good for one thing: to spark the very first action. However, as you move forward, you’ll find that your success will not come from any one person’s idea – even if it’s your own. After all, you are only one single plot on your overall customer graph. If you want to grow and move forward, you have to look at and adapt to the overall patterns in the feedback you gather from your target customers, and allow your product or service to evolve as a result.
If you can begin doing this even before you build anything at all, you’ll find that you’ll be able to craft a solutions that your customers may even finance themselves through pre-sales and early-access discounts – negating (or at least prolonging the time before) the need for outside funding.
Start a successful company, no matter what it is, could be one of the more difficult, confusing and anxiety-ridden journeys you ever embark on. Every single founder is going to have terrible days where it feels like the walls are closing in around them. These moments are the ones that separate a successful founder from one who cracks under the pressure.
Regardless of how mentally tough you THINK you are, you’ll be a lot LESS tough if you’re only in it for the payday. We all love money, but as strong of a motivator as it can sometimes be, it’s almost never strong enough to kick a struggling founder into gear. Your customers will also sense when you’re only in it for the money as it’ll be a lot less about their ROI and a lot more about yours. Soon after, they’ll run for the hills.
That said, if you’re instead intensely passionate about solving the problem your product or service has set out to solve for your customers and you absolutely love living and breathing what you’re working so hard to create, you’ll be a lot more likely to weather the storm and move forward. Your customers will also gravitate to you – so by focusing on helping them, they’ll help you in return.
Your team’s implementation of your concept or company strategy, not your concept or strategy itself, will be what determines the success or failure of your brand. However, new founders often justify hiring their friends – or friends of friends – because they both don’t know how to find and recruit talent, and they simply want to work all day with their friends.
Most of these new founders then soon realize how tricky having a prior friendship can make an employer/employee relationship. While they can succeed in some rare cases, they’re nearly always much more complex in nature.
Instead, forego hiring friends and personal connections and instead focus on educating yourself on how to recruit great talent. Embrace the “hire slow, fire quick” mantra, and never raise a round of funding until you have a great founding team comprised of passionate, proven individuals.
Every single investor will ask you about your team as they know how important it is for you – and you need to ensure this is one of the first things you address before walking into a room expecting VC money.
In my humble opinion (after starting, bootstrapping, scaling and selling 6 tech companies in the last 6 years), there is only one and only scenario where raising venture capital is appropriate:
When you’ve built a small, strong team with proven track records who have put together a minimum viable product you’ve crafted through extensive feedback sessions with your target customers (many of whom are currently using and paying for your product) and you’ve got a well-researched plan on where you’ll target more customers, how much it will realistically cost, what you’ll need build next, and what a realistic exit strategy will be for both you AND your investors.
Oh…and you have discovered, after doing all these, that you actually NEED outside funding to scale your business (in many cases, you no longer will).
If you don’t have ALL of these, keep bootstrapping!
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]]>A summary of things you should know about Startup Mixology according to Frank Gruber Introduction In this episode Tech Cocktail’s own Frank Gruber takes you inside his book Startup Mixology.Read More
The post A Preview of Startup Mixology with Frank Gruber appeared first on The Entrepreneurs Library.
]]>In this episode Tech Cocktail’s own Frank Gruber takes you inside his book Startup Mixology. His book is the perfect all-in-one strategy for serial entrepreneurs who plan on creating multiple businesses over time.
I wanted to create a book that had, start to finish, the ingredients or elements that go in to starting up. I tell the story about the harsh reality so that as you are starting up you realize that you’re going to hit those ups and downs. I explain how to get out of those dips and using celebration to help push you through and guide you as you continue to propel towards your goal.
The point of this book is to help inspire people that may be on the fence about applying some of these things to either their startup journey or internally in their company. My goal is if they have an idea that they want to launch, hopefully this is a good guide to start. It won’t be an easy path but this book will help you understand that. It should be a great starting point for anyone who has an idea and doesn’t know where to start or maybe is afraid to.
Part one is getting started and how to think like an Entrepreneur. The first four chapters are about thinking like an entrepreneur, coming up with ideas and turning those into actions. Also, how to formulate a company by getting all your documentation in place, business documents, everything filed and ready to go with both the accounting and legal side.
Part two is about the product. You start with coming up with a marketing fit, take that idea and launch it to your audience. You can start with a simple launch, with a small group of enthusiastic people and build from there. I also talk about how you measure success and how important it is to know what you need to build a business. I give the example of how Uber has done really well and grown very quickly.
Part three is about team and people. Team is crucial with starting and running a business. I show you how to find those people and what you should be looking for. We focus a lot on culture in this chapter. Culture is really everything when it comes to building a team that can execute and make sure everyone continues to move ahead. We also focus on celebration and being able to acknowledge the fact that something happened and how important that is. It’s also important to treat everyone with respect along the way and I think it’s something we sometimes forget.
Part four is sales and marketing. One chapter is sales and the other is marketing. Figuring out your marketing and sales is very important and these two chapters talk about that.
Part five is about money, bootstrapping and funding. We bootstrapped for seven years, didn’t pay ourselves for a long time and you can go pretty far with that. And we also talk about the different aspects or raising money as well. Both viable options, it just depends on your business and what your goals are.
Part six is about growth and change. Chapter 16 is about failure and failure is a big part of starting and running a business. No one wants to fail but if you do you need to learn from it, grow and go figure out what the next step is. If the company doesn’t make it, that’s not you, that’s the company. You will be fine and you need to move on from that. Managing expectations are very important and that’s why this chapter is in the book.
The final chapter is about success and it covers what success looks like, how to scale and gives a story on success. In the conclusion we share about what the path has looked like for us and talk about other resources that are available through the book.
“The best day to start is today. Not tomorrow, not the next day, today.” “Get it going and you’ll figure it out along the way.” – Frank Gruber
I am the CEO and co-founder of Tech Cocktail. Tech Cocktail is a news and events organization that is focused on startups, technology and entrepreneurship. I try to help better connect both online and off as well as connecting brands with that audience. We try to make the startup journey more memorable and fun.
It took me ten years to figure out how to jump off the entrepreneurial diving board and I wanted to jump start this for other people. It tells a little about my story but also tells the stories of companies like Uber, Zappos and WordPress and uses their stories to illustrate the ingredients that go in to starting and running a business.
How to Win Friends and Influence People by Dale Carnegie
Buy Startup Mixology by Frank Gruber on Amazon today
Visit Startupmixology.Tech.co to get extra exclusive content
Visit FrankGruber.co to learn more about Frank
Follow Frank Gruber on Twitter
Download the full transcript here
Listen on iTunes, Stitcher , and SoundCloud
Related books: All In Startup by Diana Kander | Traction: A Startup Guide to Getting Customers by Gabriel Weinberg | Zero to One by Peter Thiel and Blake Masters
Relevant advice and tips: 5 Mistakes Entrepreneurs Make With Marketing and Branding | 5 Important Things That Every Entrepreneur Needs To Know About Starting a New Business
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