My first startup was bootstrapped. My second was funded by foundation grants. My third tapped into the Silicon Valley VC ecosystem.
Like a lot of inexperienced founders, one of my implicit assumptions was that capital could help my company succeed. After all, cash is the lifeblood of a business! If only I could raise [$1M | $10M | $100M | $insert-your-number-here] I’d have what I need to make the company a success.
Over the next decade, I actually raised these amounts - and more - and got to find out first-hand that I was dead wrong.
Add something about how more money turns out it doesn’t solve what matters, while having some big disadvantages
Explain what matters, then explain what money is good for
Talk about disadvantages
Talk about simple financial planning - how much to test an expression of an idea with a buffer. Then try $0 instead, try 10x less, try 10x more
Capital helps with exactly two things:
- It keeps you in the game by buying you time to keep experimenting.
- It helps scale a business model that works.
That’s it. You either keep swinging hoping to hit it out of the park, or you add gas to an engine that already works.
Both are helpful, but neither one
You need insights that can generate hyptheses that can move the needle and help achieve pmf
But entrepreneurs, investors and the media alike confuse things. And I understand: given that companies are private, this is often the only proxy we have to measure success.
It’s just a poor proxy because of macro environments (money is cheap) as well a micro factors (someone is good at playing the fundraising game)
More importantly, there are some real and tangible costs to fundraising.
What I found instead is that
- Capital doesn’t solve problems. It keeps you in the game and helps accelerate things that work. Outside of that, it creates a ton of issues - pretend startup play, spend too much time outside of pmf trying to deploy the capital, higher bar for selling