If the Shoe Fits: Funding is No Guarantee
by Miki SaxonA Friday series exploring Startups and the people who make them go. Read all If the Shoe Fits posts here
Whether your goal is to be a horse or a unicorn, raising round after round of funding for a higher and higher valuation may do nothing more than give you a false sense of success and security.
Y Combinator’s Sam Altman summed it up in an article focused on the $1M-plus burn rate that is getting more and more common.
…it’s never good to be at the mercy of investors.
If you’re a founder, you shouldn’t want that,” he says. “If a company is profitable, the founder is in control. If it’s not, investors are in control.”
One tip he often offers Y Combinator founders: Treat every round of financing like it’s your last.
There’s a reason that popular wisdom, the kind that comes from experience claims that companies that start in moderate-to-cool and even bust economies fare better in the long-term.
As do hundreds of startups that aren’t on the receiving end of current largesse because their founders aren’t connected.
Bootstrapping or working with minimal funding forces founders, especially young ones to
- be savvy money managers;
- put financial controls in place;
- focus on productivity (not perks);
- monitor and constantly reduce customer acquisition cost (CAC); and
- become profitable or, at the least, breakeven as quickly as possible.
The founders who will be best positioned when the startup eco-system cools, as it always does, and funding is restricted are those who master the first four points and whose companies have embraced the fifth.
Image credit: HikingArtist
February 19th, 2016 at 1:15 am
[…] doing so he did exactly what Sam Altman warns against, “If a company is profitable, the founder is in control. If it’s not, investors are in […]