To Raise or Not to Raise

The Dillemma A Lot of Startups Face

A common dilemma among growing companies

Chase hyper-growth or slow and steady?

The age old question: does slow and steady really win the race? The tortoise seems to think so. But do companies? Specifically “hyper-growth” tech startups?

This is quite the balancing act for growing companies. On one hand, they are always looking to raise money and scale, but on the other hand they are trying to produce a great product. A 10x product at that. So the dillemma becomes: focus on innovation? growth? or both?

You see, Venture Capitalists and investors see funding as gasoline. The hope is that pouring cash into a company will help them explode (in a good way). Cash is an accelerant of growth. Cash helps companies scale and reach more customers; ie make a bigger impact, ie make more MONAYYY. And of course VCs add much more than just funding, but that is my super simplified reasoning for raising money: because you, as a founder, believe that this cash (the gasoline) will help you grow. * Before someone says it, yes some companies are looking for runway others resources but this is just a simplified concept that I easily digest…

Anyways…What are you supposed to do? Are you supposed to move fast and break things or are you supposed to take your time perfecting your product?

Of course there is no right answer. And in different circumstances your “answer” will change.

But here are some of my thoughts…

If you want to start a company…i think, before you waste anyone else’s time and resources (including your own), begin testing assumptions. Assumptions are worthless unless they’ve been tested. The challenge, though, is building a small version of what your dream product is. Yes call it an MVP, I don’t care, the point is you want to build something really quickly and hustle to test your fricken assumption.

The product does not have to look exactly like your dream product. This is just a way to test your thoughts. You’ll find that talking to people is a great way to quickly validate or throw out ideas.

**Warning though: people say no to tons of good ideas. The point is that 100 people can hate your product and tell you that you are going to fail. But if you can find 10 people who LOVE your product, then you may be ok. So take criticism, know when to move on, but don’t pivot every 2 days. Stick a bit to your gut, it’s your company.

So yes I think in the beginning stages of a company it is crucial to be agile, testing assumptions — that is, perhaps, one of your only competitive advantages as a startup, you can afford to test things that big companies cannot waste their time with.

So…I’d say start fast. And keep that overall mentality with you as you grow your mega-company.

But as you become huge you start to gain responsibilities, people begin to count on you. Your customers count on your for a product. But more importantly, your employees count on you to feed their families. They believed in your dream, don’t fuck them over because you want to raise money and get on Tech Crunch. Ok a bit harsh. But I think it is a question not asked enough…”why are you raising funding?”

When a VC asks you, you better have a reason. You better have a reason that tells them about all of the super fast iterations you can make, even at your scale.

Anyways, it’s more of a thought exercise…there is no exactly right time to raise or not to raise. But I think more people need to ask themselves WHY they need money before they go out and try to raise. Because raising is a full-time job and is not easy. A lot of companies dedicate all of their time to trying to get funding and never even build any version of their product!

It’s a balancing act — best of luck!

thank you so much for reading!

connect on twitter @jrdngonen

Tagged in Startups, Business, Money, Funding

By jordangonen on June 29, 2016.

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Exported from Medium on February 17, 2018.