Funding, funding everywhere but not a penny to invest in YOUR startup! Well, that’s what you feel when you are running a startup and quickly running out of cash. Several startups face this problem – they start out with enthusiasm and funding (self, family, friends or angel) to build out a perfect business, but end up spending up too much, too soon.
AN interesting thing about building a startup is that the money you assume will suffice till the time you get funding is NEVER enough. Well more often than not founders need to take the harsh decisions to prematurely kill the startup. More recently startups have realised that pivoting your startup can be the way you can save it! But pivoting isn’t easy if you have already burnt a lot of cash. The founders tend to stick around with a broken model even when they know it isn’t going anywhere, because they have investor money backing it and are too scared to put their hand up and say that this isn’t working.
In the enthusiastic race to make the game changing product/business, startups tend to splurge investor money and this enthusiasm is reciprocated by the investor to build the next billion dollar valuation. Ultimately too much money is burnt too fast and before one realises what is broken and how it can be fixed – the business is stuck between the difficult choice of letting it go or changing the path.
Indian startup ecosystem is gearing up for its next level. From being a small kid on the block we are getting to the teenage phase. This phase does bring a lot of excitement and enthusiasm along with its share of problems. There are certain levels of caution that can help this ecosystem to thrive and make it strong to breed strong startups that will stay for long.
There are a few areas which startups can keep a check on for a healthy future:
1. Be microscopic in approach: Try to prove your business model first; e.g., target your locality before you move on to the city then a larger geography.
2. Make money: You know what is cooler than 10,000 free users? 100 paying customers! There is nothing sweeter than making profits before you expand.
3. Be frugal: This stands true even when you make it big with your venture. Getting funding isn’t equal to winning a lottery ticket. The more frugal you are with your investor’s money the more confidence you will gain from the community.
4. Be under staffed: Best part of working in a startup is you get to do more than what is defined in your profile – hire people who agree to this statement. Multi-tasking by your team members is an important ingredient to success.
5. Don’t be ashamed: To ask for discounts, to ask for longer credit period, to order vadapavs instead of pizzas for your team when they working late, to take pay cuts, to fix the smallest problem on your own.
6. Keep your word: Never break the trust of your team, customer or vendor. If you cannot keep your word because of some reason things didn’t go as per plan – make sure you communicate. And do not forget to make up for it later.
I can be guilty of being called as OLD SCHOOL with my thoughts. I am not against scale and big valuations, but I prefer to see money make more money rather than funding attracting more funding. After all isn’t MAKING MONEY rule #1 for a successful business even if it is a startup.
(Deep Malhotra is the Founder and Managing Partner of Gemini New Media Ventures LLP and Gemideals.com. Deep has over 13 years of entrepreneurial and startup experience in working & building companies like Google, Myspace.com, rediff.com and Onmag.com.)