This is a cliche and a necessary problem for the survival of start-ups. Practice has proved that start-ups that are short of money are far better than those supported by venture capital. This view is very new to most entrepreneurs, because they all think that obtaining venture capital support is the basic condition for the rapid development of enterprises.
More and more studies have found that the relationship between venture capital support and enterprise success has been exaggerated. A recent survey of 79 IT companies supported by 10 venture capital found that the success of a startup does not depend on the amount of funds it has. Compared with traditional wisdom, enterprise capital is obviously insufficient and can not be sentenced to death. Even if the capital ratio is less than 20%, no data shows that it means failure. And getting financial support too early will produce many bad habits.
First of all, the CEO of an enterprise will feel pressure in a new management team. Under normal circumstances, the companies that VC wants to invest in are first recommended by headhunters? Vice president of star sales? Experienced managers all hope to get rich salary and options. Of course, headhunting companies also want to make a fortune, and headhunting expenses may be as high as six figures. What time? Vice president of star sales? As soon as he took office, he wanted to change? Star assistant? Of course, there will be other personnel requirements. There will be no less than half a dozen new employees, or more. Experience shows that with the joining of the new team, the old members of the original team will gradually relax their vigilance against reducing costs and no longer care about the extension of the sales cycle. And new employees will cater to this attitude, which will eventually quickly destroy and kill any startup.
Second, the injection of a large amount of external funds often leads to excessive growth expectations. VC is mercenary, and the profit it pursues is not only doubled or tripled. They all hope to recover their costs in less than five years. But the founders of enterprises are not investors, so they will pay more attention to the healthy development of enterprises and pursue normal growth rate. A founder who gambles on his savings is more eager to make a profit. In such an environment, every member of the company is a salesman, which is the best business model and the most dynamic entrepreneurial enterprise. Companies that are short of money value long-term profits, promote rapid growth, and ultimately lead startups to success.
Third, obtaining external funds means that founders spend less time serving customers than pleasing the board of directors. Customers are the foundation of enterprise's survival, and it is much more practical to approach customers than to please investors. In the short run, investors are good for the company, but in the long run, customers are the most important. Many CEOs of start-ups spend more time reporting to the board of directors after large-scale venture capital enters the company, and gradually give up the customer-centric style. Although we constantly optimize our product mix and launch new products, the purpose is to repay VC as soon as possible, not to meet customer needs. ;