Getting Funded – The Facts

 

Have you ever watched experienced entrepreneurs landing a bit of funding? You might have noticed the lack of champagne and those amazing parties right? Well, the reason why they cut back on these frivolities is simple: they know that they do not own and control the whole of their company. Call it a sacrifice if you may, but that is the bargain that they put up to make their dreams come true.

The truth is, what the term ‘success’ really means tends to vary among funded companies. Just a few days back, while I was attending a board meeting for a business plan competition, the topic of ‘metrics for entrepreneurial success’ came up all of a sudden. Quite unanimously, the entire board came down to agree that the best metric for the measurement of success of the companies where the competition was to check how many of them had actually raised more money. For such people, success does not have anything to do with the team, product or profits.

Now, you need to realize that landing a few investors does not mean that your entrepreneurial days are over. Come to think of it, it’s a new start all over again.  Here are a few facts abut getting funded:

It takes more than just selling valuable things
Instead on just selling valuable things, why not become valuable yourself? Whether you like it or not, business is no longer based on just selling, making more money and stressing out over value later on. It is necessary for funded companies to improve their book value. For this purpose, they need to balance their efforts between conventional sales and growth of intangible assets that are valuable. These include trademarks, patents, customers and people. Moreover, they must always stay prepared for a future acquisition.

Your timetable does not matter much anymore
It is downright necessary for a company to become a liquid during times when investor expectations are to be met. Most unfortunately, this particular timing rarely ever gets to match the original plan of the company. For example, it is quite necessary for venture capital funds to recoup their stake in a mere five to seven years so as to fulfil the needs of their investors. When this particular need to send cash to investors rises, it becomes necessary for the company to make major equity decisions at the worst of times.

Heat yourself up – Avoid burning down
You would notice that startups that are well-funded tend to stay in the lime light and they are usually ready to do anything they can to be able to stay there! However, when they go through down rounds, or if early investors drop out of all future rounds, their position is in turmoil. The rumors that spread out can negatively affect their perception in the market.

 

 

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