Don't Have the Street-Smartness to Raise Funds for Your Venture? That May Be Lucky. Here's Why.

In a study done in the US of high growth start-ups, more than 80% of these companies were financed through the founders' personal savings, credit cards and second mortgages. The founders of these start-ups essentially relied on debt or retained earnings to grow. 

Businesses nourished with customer's money follow the shortest route to success as you will be forced to think of ways to make the biggest difference to the customers by focussing on solving their problems rather than spending time wooing investors. More often than not, entrepreneurs confuse raising money with building a sustainable business. These two not only require two completely different mind-sets but also completely different skill-sets.

Time and brain-power spent by founders; in churning out business plans with 5-year projections to attract venture capital in an environment that is rapidly changing and uncertain by its very nature; is sheer wastage as this does not contribute towards strengthening the fundamentals of the business.

The only reason to raise money should be to scale your business, after you have hard data that proves you have a business model that is not only profitable, but repeatable and scalable. Without this, the investor money is too much too soon with the founders not having the entrepreneurial wisdom and maturity to lead their businesses towards contribution and sustainability. All that is left then are bubbles bursting all over the place. 

Here's what Arthur Rock; America's legendary venture capitalist who helped finance Fairchild Semiconductor, Teledyne, Apple and other companies; has to say - "I usually can tell the difference between people who have that fire in their stomachs and those who see their ideas primarily as a way to get rich. Far too many people are interested in building a financial empire instead of a great company. I want to build great companies. ... I look for people who want the same thing."

So, whether you are a founder or an investor, make it your business to build great companies that evolves humanity to the next level. Chase money, you may or may not end up anywhere. Chase making a difference and you are likely to create unimaginable wealth besides leaving a legacy behind. 

The relationship between investor and founder should be that of coach and coachee, mentor and mentee; with the investor committed to support the founder to create success even it means the original business model has to be trashed along with many others to follow because building a great business is an iterative process and you are not likely to hit gold with the first business idea.

Leave footprints in the sand of time; instead of dead dreams, lost hopes and a lot of heartburn. You can do this if you invest in the fundamental principles of business building, increasing your leadership depth and commit to be the world's best in what you do. Then, the entrepreneurial journey becomes the path to your highest self and your business mirrors that.

Love,
Jyoti.