Many of today’s startups are obsessed with figuring out the best way to score investors with mostly half-baked ideas and no customer validation. Serial Silicon Valley entrepreneur and current head of the entrepreneurship accelerator arm of Microsoft, Rahul Sood once said in an interview that, “India is probably seeing an entrepreneurship bubble that may collapse even if it doesn’t go completely bust.”
Focused on investors instead of customers
When you don’t have a lot of money to bootstrap your startup, you are forced to turn to the funding source. But if all of your efforts are focused on designing a product that customers want, enjoy, or find useful, you’ve got a much better chance at success than someone who’s focused instead on convincing investors that the business will be viable one day.
Traditionally, an entrepreneur is supposed to exhaust every source of possible funding and then go to angels, while today most startups are focused on pitching for funds from initial slides of their presentations.
However, that doesn’t mean that a business cannot pursue both customers and investors simultaneously, as clearly a lot of companies have done just that. At the same time, it can be harmful to be concerned only about what investors think when you should be worried about customers, who will prove to be a more sustainable and important funding source.
What’s going wrong?
Entrepreneurs are not spending enough time on customer validation; resulting in poor products with fewer buyers
Increase of too many angel investors or mentors who have little start-up experience
Giving up too much stake too early in the business cycle, resulting in entrepreneur being left with a minority stake and little interest in the venture
Let us look at some ways on how not having an investor or funding at the early stage of your startup can prove to be productive:
Being broke is good
Sometimes, being broke is all you need to cut through the options and set limits. It forces you to think clearly about how to get things done in the little amount of capital. So where many funded or established companies would tend to throw money at a problem and explore all the avenues possible, a bootstrapped company will have to find the best way, fast and cheap. This leads to a culture of problem solving that almost every successful company has.
Prioritizing tasks and spending wisely
Once you have investors before the product has been validated, you tend to lose focus. When you have enough money in the bank to pay for bills, for months to come, you get busier debating on silly matters like the colour of the company’s logo or buying a coffee machine while important matters take a back seat.
Focus on producing a product that sells. A lack of funding in the prototype stage will help you prioritize your tasks better. A core sense of urgency usually leads to the most critical tasks being handled first, while less important matters are saved for later. The result is that spending is more prudent, the product is designed in a focused manner, and team members and resources are employed more wisely.
Enforcing discipline and maximizing returns
There’s no room to be loose with resources, design, or responsibilities for any startup. As a result, a culture of discipline in many areas of the business tends to arise organically. So, deadlines can’t be allowed to slide far, and every member of the team is held accountable for delivering their share.
In any industry, maximizing returns from time and money spent is often the most basic central goal. At the end of the day, all entrepreneurs who hope to build something more than just a sellable idea should ask themselves one fundamental question: Do I really need funding?
Dose of realism
While entrepreneurship may always be a sexy story for the media to tell, our needs as working people are about much more than trending startups. It may be better to work on a job than to quit and start up just for the sake of a change.
Let your product be the source of funding and then set out to find an investor, because if your product makes money, investors will automatically take notice.