The Exciting World of Startups
We see it everywhere in the news. Start ups are constantly being under the spotlight w
ith exciting innovations, concepts and are heavily funded by investors. After I have left my job and wanting a startup and achieving similar goals, I discovered that not everything seems to be how we see it. There are many start ups out there that are surrounded by press and media all the time reporting on their current funding, and the future of the company. Most of the time, there is no way that these companies can make their promises to their investors and will unfortunately fail to provide an ROI to their investors.
The Reality on Start Up Funding
Many will associate startup success to raising money and depending on the industry and business you are in, at times having a big investment is really important for leverage and to run your business. But other than that, raising money for a company is similar to a baker getting his flour, which goes back to how you are able to make the most out of it for your long term business success. Based on a report by FastCompany, it states that as many as 75% of venture-backed companies fail and never return cash to investors.
“Money doesn’t guarantee success; only effective execution can deliver that goal”.
It’s a long tough road as companies with this level of attention will be monitored by the public and media and a certain level of expectation is set on them. There are so many variables on how the business will succeed or fail. As a startup owner, we need to learn from the successful ones and implement the right strategies, and managing investments the right way.
The Next Step
Despite all the spotlight and attention, you have to get down and dirty unless you own a unicorn business that has over $1 billion in valuation. I recently watched a documentary on Netflix called ‘Fyre Festival- The Greatest Party That Never Happened’.
Fyre Festival was touted as a luxury music festival back in 2017, claiming to be the next Coachella or Burning Man, and the news of its failure spread like wild-fire the moment it was uncovered. At the start of their campaign, they managed to garner over 300 million impressions in just under 24 hours with the help of influencers, most notably Kendall Jenner. They have made many promises that they eventually failed to deliver and the backlash that came after become internationally known. Check out a short clip of the documentary shared on ABC’s Youtube channel.
The founder of the festival, Billy McFarland raised around $27 million from investors, but he did not know the recipe and the process of creating an actual music festival. Millions were spent on marketing, garnering all the attention but the festival turned out to be one of the biggest failures in music festival history. It doesn’t matter if the vision is there, what you need is the grit and the tenacity to follow through as well as being grounded at same time. You don’t want to raise this much money to sell a huge giant pipe dream to investors.
The Start Up Dream Isn’t What It Seems To Be
Nowadays, everyone’s so caught up with the entrepreneur, the startup dream where anyone can build $1 billion company. Just because Mark Zuckerberg can doesn’t mean that you can do achieve the same. Mark has the technical expertise to make it happen, and have received traction before launching to the public by testing it with friends and colleagues.
So what I’m trying to say here, is that the startup journey doesn’t necessarily have to have glitz and glamour. It needs to be profitable, and to be able to grow without investor funds. With investors’ funds, chances are you won’t know what to do with your investors money. So back to the Fyre festival, Billy McFarland is currently in prison because of scamming investors with promises that include various fake facts about revenue and profitability and with other cases such as Theranos shows that with huge investors pumping money into a company, it doesn’t always turn out the way they wanted it to.
I want you to change your mindset and don’t have the thought of startups needing to raise money to start it off. You need to get your unit economics right. If you lack the expertise, hire someone to help you and listen to advises. The biggest mistake that Billy McFarland did was that when consultants and event managers mentioned that the festival couldn’t be done right based on his promises on time and cost, and were totally impossible to fulfill, this had led him no choice because of the amount owed to investors and wit desperation, that’s where things got out of hand.
Don’t get yourself in that situation.
What do you want to do is instead is plan your things out properly, have an achievable goal, consult the experts before raising money. Don’t raise money with fake data because that will backfire on you, and you might have to answer to the law for that.