Getting funding for a venture that you have started with all your passion and hard work and effort seems to be some sort of a reward for all the toiling and compensates for that cushy job you happily gave up to pursue our dream.
If you’re wondering what the chicken and egg debate is all about, here it is. After nurturing the business venture for a considerable period, the need to scale up – whether in terms of target market or product extensions etc, is a necessity.
When one decides to scale up their start-up venture there are generally two ways to go about the entire exercise – either use technology to scale up the start-up offering or start looking for funding in order to scale up in the optimum manner. From the outside, it might seem that both can happen together at the same time, but when things start from scratch and each decision in a start-up is taken rationally after weighing all the pros and cons, the reality is far from simple.
Considering the current times when the sources of funding are many, but investors are treading with caution, things aren’t all that easy for entrepreneurs. Or at least that’s what they feel! They are constantly questioning how to scale up without enough funding to keep them going. But I see it the other way around.
If the startup continues to focus on its product and technology rather than funding, things will begin to fall in place themselves since there would be a constant incoming cash flow in terms of the revenues generated. This way you’ll always have money to keep things rolling, even if it means going the frugal way. You can always cut the ‘frills’ for now and focus on the right things to ensure that the startup gets past the crucial early-stage when most startups fizzle out. Remember, funding may not necessarily ensure growth and scale, since if the very foundation of the business is weak, it is bound to fail. On the other hand, if the product and technology are sound, it’ll automatically drive growth and attract more investors for the startup. So in a way, entrepreneurs are worrying about something that’s not such a big deal after all. Their real worry should be how they are faring on the product and technology front.
Receiving capital for an idea coined by you seems like the ideal situation for all of us. Moreover, getting funding for a venture that you have started with all your passion and hard work and effort seems to be some sort of a reward for all the toiling and compensates for that cushy job you happily gave up to pursue our dream.
There are no points for guessing that getting funding is always a temptation. After all, it is always an easy option to play with other people’s Money. As a result, most entrepreneurs start focusing on chasing investors right from the start. They equate funding with success and feel it is the only way to accomplish their vision of making the venture a success.
In the process, other important things, which are essential in laying down the foundation of the business, start getting ignored. Hence, in many scenarios even with requisite funding in their kitty, start-up ventures increase their chances of failing since their business venture stands on shaky ground.
As a close observer of the startup eco-system, I have always believed that building a solid product forms the core of a successful startup venture. Therefore, if the entrepreneur focuses on developing a great product and/ or service that strikes a chord with the customers instead, it is only a matter of time before the revenue starts flowing in. Once the revenue comes in, the money keeps things running in autopilot mode.
Moreover, in a bootstrapped venture with no external funding, the zeal to succeed is far higher, since the stakes are high for them not just professionally, but also personally. Additionally with a frugal approach and ‘no frills’ culture, the entrepreneurs learn how to do more with less and sustain better. With the entrepreneur’s energies directed at all the right places, i.e., on the product and/ or service (a large component of which is driven by technology in today’s new age startups), the sound health of the business obviously reflects in the business metrics.
Once the business is on a firm footing, and is ready to scale up, that is when the entrepreneur should ideally consider looking for external funding. This is ideal because, there are clear metrics that show the performance of the business, traction, and proof of concept, and even the investors will require less convincing. The numbers will speak for themselves. As a result, chances are, you as an entrepreneur, can negotiate the funding deal on your own terms and conditions to a large extent.
With a proven business model, a product and/ or service in the market which has a large customer base and even larger potential customer base, will always find it easier to attract funding from investors across the table and scale and hence, take the business to greater heights, once capital funding is received.
Therefore, it would not be wrong to say that for most startups a solid product, powered by technology, is the chicken that can yield far better returns than mere funding. It can prove to be the means to get the golden egg in the form of funding. A proven product when funded, can give any start-up the edge it has been looking for all along.
Published on FirstPost
