Everybody and their mom wants to raise $10 million. “Once I get funding then I’m going to really blow up this business, I’m going to scale, I’m gonna exploit my first-movers advantage, I’m going to capture a bunch of market share, I’ll become the de facto leader in the space, I’m gonna finally be able to invest in research and development and make that key hire, I’m going to have economies of scale…” etc. etc.
Most of that is bullshit. It’s words you came up with to rationalize a feeling. Really, you have a business that doesn’t quite work and you’re looking to outside funding as your messiah, savior, and salvation. You’re after instant validation, you’ll be successful overnight, “If I raise $10M then I will have made it, then I’m worthy, I really will have arrived, my Dad will be proud of me, no matter what happens after that I will always be able to say that I’m a big deal and I finally will be!”
What if you just had a really great business instead?
Boring, I know. But what if you had regular uninspiring organic profitable 20% or 30% growth year-over-year for a few years, slowly and steadily mastering your niche and nailing your product-market fit? “No, it’s not fast enough, what about twitter they never make money…no I have to have an IPO everybody’s doing it! Faster faster faster there’s no time!!” Don’t worry, that’s just the normal spewings of an unchecked id -- that myopic child’s voice inside that wants now! more! better! saying “I want it I want it I want it!”
“No, no but I’m different!”
Maybe. Here’s some ideas to slow it down for a minute – a quick breath for some checks and balances. Let’s do a reality check/stress test before you just go out mindlessly following the crowd like a lemming over a cliff.
Rule of 40
It’s common in the tech/SaaS industry as a rule of thumb to have a total of 40% when you add growth + profit. You could have 20% growth + 20% profit. Or 40% growth + 0% profit. Or even 100% growth with -60% profit (aka 60% loss). And in any case…you’d be living the Rule of 40. “Well I want 100% growth AND 100% profit because I live in world of abundance and anything is possible and my mom said I can be anything I want to be when I grow up!” Simmer down.
Point is, does your business have the Rule of 40 going for it?
If you do, you pass a test and investors generally want to invest or at least listen to your pitch. And if your business isn’t even close but you do have a whole bunch of stories…nobody wants to listen to your story-time.
Which brings us to…
Paradox of Needing Funding vs. Getting Funding
It’s a Catch 22.
The businesses who need money struggle mightily to raise money. There’s a reek of desperation, a neediness, their numbers aren’t quite compelling. And they often spend a lot of time and resources seeking funding instead of focusing on making their business great. Lots of meetings, no firm commitments. They often end up getting a raw deal (if they get a deal at all) and they’re apt to over-promise and under-deliver…which is kinda fine for the investor because they built that risk into their calculations and will now either gut your company or insanely micro-manage its leaders or both.
The businesses who don’t need money can raise ungodly sums without trying. And a lot of times…they don’t. They don’t need it. And when you’re coming from a position of strength and financial independence…you would only accept an extremely compelling offer. You’re not going to give up much control, you’re going to get great terms, and it’s going to fall in your lap without even trying. People will be soliciting you for the privilege of vaulting money at you.
“I want that, how do I get that…I want to be a cool kid not needy/desperate.” Well then…
Live the Be-Do-Have Principle
Most people have it backwards (Have-Do-Be). They think: once I HAVE xyz, then I will DO the things I need to do, to BE the person I want to be. They apply it to their business: Once we HAVE funding, then we will DO big mega sales and, and then we will finally BE a big badass killer company.
Nope. Other way around. BE the badass person/company you want to be now, then you will DO the things that naturally follow, to then find yourself HAVING the things you want to have. So BE a great company first (check out EOS it can help), then DO things consistent with that great vision-driven, high-traction, super-healthy company you are, and you’ll find yourself HAVING a company that’s the talk of the town.
I don’t know who originally invented the concept, but Steven Covey talks about it in “7 Habits of Highly Effective People.” It’s a lot easier said than done, I struggle with BE-DO-HAVE on a daily basis…so easy to fall back into thinking “Once I have X, then…” You gotta have an internal locus of control (master of your own fate) not an external locus of control (waiting like a victim for the world to deal you a better hand).
How You Do Anything is How You Do Everything
One of my favorite sayings to live your life by (thx T. Harv Eker’s “Secrets of the Millionaire Mind”). Idea is: if you can be successful on a small scale, you can be successful on a large scale. If you can handle an ice cream cone with 1 scoop, you can handle 2 scoops. If you can’t handle 1 scoop, you sure as hell don’t deserve 2 …you’re just going to drop it and cry and later reflect how that kid was setup for failure.
If you make a habit of doing great work without cutting corners or sacrificing your soul in small decisions, you’ll keep doing that on larger and larger decisions. And the reverse is true: if you make a habit of doing shoddy work on small jobs, that’s what you’ll do on big jobs.
Upshot is that your big actions are a reflection of the small actions you’ve been practicing. So a greater stage will reveal you for who you really are. So have a great business now with your current business on its current scale…and if you can’t do that, why the hell does your company deserve more money!? Money by itself will just make you more of what you already are. So a somewhat successful struggling company without funding…you’ll likely end up a somewhat successful struggling company on a higher level with funding. Then you’re broke at a higher level; what a waste.
Enable Defense Mechanism: Crucify the Messenger
And you can say “oh Jake you are naïve, you have no idea, my circumstances are different, you’re talking theory and it’s different in the real world, actually everyone knows that tons of successful businesses in fact do need fundraising, most successful companies have raised truckloads of capital, so you’re full of it, what the hell do you know, you’re just wrong and out of touch and so off-base!”
Maybe. You might be totally right. Maybe you are special. You know best and make your choice. I would just challenge you to get real, think deep, and be honest: do you actually NEED money, or do you WANT money?
I don’t want to shatter your illusions (well maybe a little) but I like to think that I exist to challenge (productively I hope).