Fundraising and investing. It’s all about the elusive chase for those unicorns isn’t it? Wrong.
Yes, it is true, unicorns do exist! And don’t we all know it? I’m talking about in startup and business terms of course. Even if the ones we read about in fairy tales are only mythical creatures, billion dollar companies are not. You know the ones, those which have managed to raise huge amounts of capital. They are very real and there have been plenty of them in recent years.
In fact, so much has been the knock-on effect of the rise of these unicorns that a new reality has been shaped. Whereby startups and investors are constantly participating in a relentlessly endless chasing game. And in this game the hunter and prey roles are often interchangeable. One’s existence defines the other’s destiny!
In our book, this is a very uncomfortable reality. And there’s a real danger that the above creates dumb startups.
A fundraising and investing reality check
Time for a real reality check. Even with the apparent economic progress and financial growth— on a best case scenario —there’s something wrong with this mentality on fundraising and investing from both sides: investors and startups.
Investing, masquerading as gambling
Investors, driven by gold rush fever are looking for the next “baby-unicorn” company that will return their initial investment many times over, by reaching a valuation of over $1B. And so they are ready to put most of their eggs in one basket. And far too often, they do. Which leads to a misguided concentration of investments.
But, how easy is it to separate the wheat from the chaff? What are the chances of investors finding that next unicorn? Just take a look if you want at this year’s US tech startups that became unicorns: there’s only 35 of them. I mean, even if they do examine the risks with caution and carefully inspect all the metrics and KPIs, where are the guarantees? And what if their beloved unicorn loses its horn, as soon as they acquire it?
Fundraising for the wrong reasons
Startups on the other hand, are typically driven by wobbling motivation. Their desperate need to endure and their desire for prosperity. They are constantly striving to raise money to extend their “runway”. And as is often the case, this involves leveraging any possible means. From bootstrapping and crowdfunding, to funding from venture capital firms or business angels. They do all they can to get valuable financial resources. That’s fundraising and investing for them.
So, if you count yourself among those startups that are desperately looking for the next round of fundraising then the main question to ask yourself is “What am I going to do with the money I’ll get?”
That may sound silly, but it is surprising how many times we see a company trying to raise funds without any concrete plan of what they want to do with the money. The difference lies in questing for money in a way that will help you set the ground for your business’ development and growth. If you’re searching for funding only for the money, you need to realize that this way of thinking, obviously, won’t take you very far.
Yes, business is all about money and entrepreneurship in a way, as well, but it makes a difference if you only focus on profits that come as a financial aid without creating any real value.
Our approach on fundraising and investing
Spoiler alert! This next paragraph may sound like we are blowing our own trumpet but please, humor us. We prefer the lean approach to both investments and funding, as well as in our procedures and way of working. Why? Because we know that this works. Investments are all about timing, you see.
Or, to put it another way, it’s the way which has more chances of success. We have seen it time and again with our startups which have exited and are currently scaling up. We also know it as we have three different roles: we are investors, co-founders and mentors/coaches for our startups.
As investors, we’re not looking for “the next Facebook or Snapchat”. Forgive us for saying so, but that is simply a trivial expression. Think about it for a moment. It reflects a whole misconception of the startup community at a global level. And no, we’re not pessimistic. Not at all. On the contrary, if we were we would not be doing what we are doing today.
What do we propose?
What we do is focus on a specific market segment in a way to minimize the risks of our investments. And of course we offer our startups much more than simply an initial capital amount, but a “package” which is based on their needs.
As co-founders and mentors, we also follow a similar procedure and we help our startups grow from the inside. We try to instill in them a healthier attitude towards money for their business development. We guide them in applying lean methodologies on their business procedures as well as their fundraising. Put simply, we give them a noise-free experience so they can focus on what matters most, developing their products and growing their business. And this is because at the end of the day, we are still investors and, of course, we do want to make our money back and then some! 🙂
How to increase your chances of success
Prepare for pitch days but don’t count on them. Yet.
That’s exactly what we do with our startups. Yes, we help them get prepared mostly for the following reasons: to get feedback and learn more about where they stand. Besides, it’s the easiest way to find out whether the money you want to raise will be monetized in resources for vital and meaningful key activities for your company.
Actually, the whole truth emerges when you try to mock up your first pitch presentation. If you are honest with yourself and you are also ready to accept criticism/evaluation you’ll see most of your weak points as well as your strong points. You will know what you need to change and your direction in general. And what’s better than that? The perfect way to make adjustments, fine-tune your road-map and prepare for a future successful perfect pitch that will bring you that longed-for funding. Fundraising and investing is a never-ending process, after all.
Invest in your team
If you want to go fast go solo. If you want to go further, go together. This is one of our key mantras, even if that sounds cliche. It’s all about teamwork. We’ve seen this one happen, too. And sometimes this is “the secret recipe for success”. That’s exactly how Vangelis Mihalopoulos the CEO of Yodeck, a spin-off startup of ours that is currently thriving, put it in his latest speech at a recent Open Coffee entrepreneurial event, here in Athens, where he was a guest speaker.
Take it customer by customer
Experiment, learn and move on to the next step. Release your MVP, get customer feedback, make adjustments and repeat. Fail fast, and then continue your experiments to learn and evolve. Feel the vibes, learn the lessons, listen to your customers and continue. Align your product development procedures so that you finally meet all of your customers’ needs. And always put your business model first.
Also, make sure that you work towards your business’s scalability. Think of it in another way: if you can get one customer it means that you are able to get 10 more, if you can get 10 more it means you can get a hundred and so on. It’s a matter of math after that. Your customer development should work in parallel with your product development.
Patience, Patience, Patience
But not the kind of patience that makes you passive. The kind that helps you continue and persevere till the end. Besides, entrepreneurship is a game that requires endurance and in the end, the race is long. Running a startup is a marathon not a sprint. Trust us, we know. Save that word for the software developers and engineers in your team. Above all, stay lean.
Takeaways: Reevaluate your incentives
Did someone say takeaways? I must be hungry. Anyway, I digress. What fuels your venture? Is it the money you hope you’ll get? Well, if so, your opportunity and your capital in the end are your customers. And they’re out there.
So, don’t wait for them to knock on your door. Because they probably won’t. Focus on your business model, it’s development and growth, the lean way and success will come your way sooner or later – and more often than not.
Watch out for unicorns, by all means. Fundraising and investing is their way, as well. But don’t be obsessive over them.
P.S. If you’re asking yourself “should I apply for funding from Starttech Ventures?”, then read this first. Then get in touch, we are always willing to listen.