Don’t assume that borrowing lots of money can make your startup fly!

Don’t assume that borrowing lots of money can make your startup fly: We know that funding is one of the most common reasons why a startup fails. This quote however highlights that apart from funding, there are several other challenges that a founder should navigate through. Funding is only a part of the problem solved. It gives you an opportunity to expand, but you ought to reach some requirements such as product market fit, customer agreements etc to make this viable.

But I understand why funding is given so much importance. It takes far too long to raise funds and be an able to put this into good use. There are several types of funding you can follow based on the type of your startup. But once you have that sorted, let’s talk about the other challenges that you’ll face in a startup.

Don’t assume that borrowing lots of money can make your startup fly. There are many things to the business other than investors, and it’s possible to succeed with your startup without breaking the bank.

-Barnaby Lashbrooke, Founder of Time Etc.

Fundraising is startup is hard work

Honestly, if there was a way to run a startup with no money, that would be my first recommendation (How to run a startup with no money?). It was always a huge amount of pressure to convince investors about the value of your business idea. Although we managed to raise good funds, we failed the market test because the market or product fit wasn’t right. Fundraising took an enormous amount of time for us, sometimes even compromising the time we had for product development.

The good thing about funds though is that you can find ways to invest in product development and not worry about wasting your time. You can fully invest yourself in product, market and customer development – in other words it helps keep the distractions away. With so much hard work, I can understand why it feels like fundraising is one of the most important things in a startup.

Don’t assume that borrowing lots of money can make your startup fly Meaning

Looking back at the early startup days, finding money seemed to be one of the hardest routes. As a tech startup, we needed funds for product development. It meant that without money, we wouldn’t be able to make any progress. Naturally, at some point, raising funds became the most important thing. I’ve talked a little more about this in raising funds for a startup. Thankfully, we were quite successful in using both the seed funding and Series A routes.

But the truth is – a startup needs more than a good idea, money, execution, strategy etc. The market is one of the most dominating factors which influences whether you can be successful or not. Although all clues pointed us towards a success, it simply was a fact that the market didn’t respond the same way we wanted to. Ours was a GDPR software that depended on strong implementation of its rules. We were heavily dependent on implementation of GDPR in these companies that would enable further adoption of our software.

The point I want to make here is that – failure can happen for many reasons in a startup. It is tempting to assume that fundraising is one of the most important things to do. And at some stages, since your survival is at question, fundraising is important. But, there are more things to plan for in your startup journey. Fundraising is only a starting point for more challenges, opportunities to explore. And I think that’s the heart of this quote -don’t assume that borrowing lots of money will make your startup fly.

Reasons why startups fail

I wanted to use this opportunity to reinforce the point of borrowing money in a startup. It is great to have the money resource that can aid hiring, product development etc. As you can see from the stats, the top reasons why startups fail are:

1. Running out of money – this speaks to the main focus of the article. Most startups unfortunately don’t have the luxury of money or support to run the business. This means that they are forced to shut down even before they see how the market responds to their idea
2. No business model: Problem with finding the right commercial fit, channels for selling your product and understanding value that you can drive. A part of this is also about being able to articulate your USP , how it affects the overall price segmentation etc
3. Wrong teams: This is crucial – so often teams look great on paper. However, startups can put these teams through severe tests. Even the best sounding teams on paper go through stress. Unless these teams know how to deal with these stresses in a respectful way, a startup breaks. Breaking of co-founders and relationships in a startup is too common an outcome.
4. Lack of market need: The market is your final frontier – unless the market says yes, there is no future to your product. This is what Product/market fit is all about. The first real measure of success in an early stage startup is achieving your product market fit.
5. Failure to adapt/change/pivot: I will leave with this as the final reason. The graph below shows you more reasons as to why startups fail. A business plan, idea, market – everything changes. As a startup, we have to adapt quickly and create opportunities. Unfortunately, feedback isn’t always easy to digest. We must act objectively and make the right choice that helps you assess what to do. Ultimately, it is your decision as a founder – to be respectful of the money borrowed and being honest with potential probabilities of success.

As you can see – I will reinforce the meaning of this quote,

Don’t assume that borrowing lots of money can make your startup fly. There are many things to the business other than investors, and it’s possible to succeed with your startup without breaking the bank.

-Barnaby Lashbrooke, Founder of Time Etc.