5 reasons why startups should stop celebrating funding announcements
January 10, 2019
For Bombora CEO, Erik Matlick, the measuring stick for startup success is not, and should not, be the amount of funding raised. Throughout his entrepreneurial successes, he has grown to realize that funding rounds capture more media attention and industry praise than they do the desired outcomes for a given business or founder.
While funding can surely provide validation for a founder, it often comes with strings attached to the deal and may not be cause for celebration, says Erik Matlick. What might be a better idea for the longevity of a business and the freedom of a founder, is to stay lean, focus on product innovation, and grow in an organic way without compromising control. Erik provides some tips and best practices for following this path:
Approach funding mindfully
The key to raising money is figuring out the optimal way of doing so beforehand: how much, and from whom. Every time an entrepreneur raises money, they make a decision that impacts his or her future options for additional financing or an exit.
Be mindful about your goals and approach to make sure you're not conflicting with what is best for employees and customers.
Build a disciplined organization
When making a conscious decision to fund growth through organic revenue, an entrepreneur must be disciplined in how they spend their money. A finite amount of money forces management to make hard decisions about expenditures and where to focus.
Invest in product before sales
There is a constant debate in the tech space on whether to invest in engineering or sales. In the early stages of a company, I prefer to focus on R&D and product, while spending very little on sales, and almost nothing on marketing. When customers want a product to perform certain functions, a business needs to hire engineers to create revenue. When an existing product creates revenue, then adding salespeople is a clear path to even more.
Forge a relationship with the bank
It’s really important for entrepreneurs to understand how to build credit, because one day they’ll need it. The first time I took a line of debt, I didn’t need it. But, things didn’t go as planned with that startup, I borrowed more, and paid it back. Learn more about how to achieve a good working relationship with a bank in the full post.
Create value, not headlines
There’s a time and a place to take funding, and more often than not, entrepreneurs take money at the wrong time and get stuck. Entrepreneurs should be celebrating the creation of value and positive outcomes for a customer, not an artificial event like raising money from an investor.
Find the full context of this article on Erik's LinkedIn.