We often read about tech startup stories similar to that, but quite often the conclusion of the first raise marks the peak of their existence. You won’t read about this rather disappointing side to tech startups in the mainstream media coverage because it isn’t sexy, but it’s reality.
Not every startup is an Uber or Airbnb. With that stated, it’s often not the technology/idea that lacks the ‘Uber potential’… it’s the lack of execution from leadership after the first major round of funding that takes the company off the rails.
Working in the public markets, I’ve seen this scenario play out a fair amount: A great startup is executing on all of its milestones, building a cool company and putting the right people in place as they prepare to raise their first substantial sum of money…
Never an easy task, raising money is often viewed as an accomplishment within itself. But that attitude is treacherous. Raising money is a necessity for startups, not an accomplishment.
[Tweet “Nothing fails like success #quoteRobinSharma”]
You must always respect the money that invests in your startup (and view all your investors, no matter how big or small, as business partners), but the moment you start viewing raising money as an accomplishment, you’re veering off course.
Having several million dollars in the treasury after a financing has a way of making some entrepreneurs content… without consciously realizing it, they feel as though that money serves as a safety net, always there to catch them if they misstep in their execution plan. Sadly, I’ve seen big financings make entrepreneurs idle, cocky, and even lazy.
Robin Sharma once wrote that “nothing fails like success.” How true that statement is. If you view the completion of a major financing as proof that you’re successful, then be prepared to fail.
To avoid this all too common side-effect from raising capital, I recommend staying in constant contact with your investors (business partners), because they’ll keep you grounded; and always act as if you only have three months of money left in your till to survive. Fear is the greatest motivator.
If you don’t deliver on a substantial milestone (clearly define beforehand what those are), in addition to adding at least one innovative feature to your company’s offering, every three months, you’re not doing enough…
Convincing yourself that your company needs to continually prove itself every three months is vital, especially in the fast-moving and ultra competitive tech space.
[Tweet “#Fear is the greatest motivator”]
The key is to always maintain the level of hunger and enthusiasm you had when bootstrapping your startup with your own bankroll.
My business partner has a great philosophy when it comes to financing capital. While conservative, it adds to my point well. He treats all the money raised from investors as if it were his ‘mother’s retirement money’. In other words, if he doesn’t use that money to try and create exceptional value very quickly, there will be great consequence… it takes that kind of mindset to use the money wisely; and investors will love you for it.