Startup Funding Doesn’t Always Create the Right Type of Acceleration
August 24, 2010 | Ben Yoskovitz
In a recent conversation with a friend (and fellow entrepreneur) we were discussing a couple of his bootstrapped initiatives. He’s struggling with the pace at which things are going, partially because he has to “pay the bills” through consulting. That time away from his startup and startup projects is hugely distracting. I know the feeling, since I’m in the middle of bootstrapping a couple initiatives and doing consulting work as well.
But this was my comment: “Money doesn’t always accelerate things.”
Correction: Money does accelerate things, but not always in the right way.
One of my favorite posts about funding (that I wrote) is this one: What Does Your Brain on Funding Look Like? For starters, the visuals still crack me up (yes, I can laugh at myself plenty.) And it’s still so damn true.
So money does accelerate things. You spend more money, things feel like they’re moving faster. But is that necessarily real and useful progress?
The minute you have money you start doing things that you otherwise wouldn’t do. You hire people. You get an office. You create (or are forced to deal with) administrative overhead. You buy fancy business cards. You do more stuff but “stuff” doesn’t equal “success”.
While bootstrappers struggle to juggle their startups (typically non-paying at the start) and paying work, funded companies are juggling a whole bunch of other issues. Probably more issues. And they can also get lulled into a false sense of security because they now have “runway.” Runway is almost a meaningless concept unless you know where you’re going. A runway ends somewhere, and if it’s ending at a cliff, who cares that you had money to spend all the way?
Funding does accelerate things. It automatically creates a sense of urgency, but not a sense of focus. It doesn’t automatically make your product better. It doesn’t guarantee anything … except that you’ll spend more money.