I often ask my clients, usually early stage start-ups. One question: Why do you need this money! This is the same question all investors ask.
Since, I am bound by confidentiality clause, I won’t reveal names, but the most common answers I get are:
- I need it to build my company!
- I need it to market my app and create visibility!
- We need it to recruit and retain top talent!
And the answers are these endless pre-decided answers which are good to hear but seldom right!
At least, with time, they prove themselves wrong! And why shouldn’t they? Hearing stories about who’s who of big colleges and institutions getting big chunks of money every day from not ever heard of Angel Investors and some famous VCs. Even High Net-worth Individuals and Bollywood celebrities have now ventured into angel investing! And that’s just the tip of the iceberg!
Seldom do I hear founders saying I want to develop a product/company/business/team from the scratch. It takes lot of nerves to actually accept, say that and mean it! ‘The money will help me hire a financial expert who will guide me the best use of the money in my start-up business’.
Remember Silicon Valley? Jared is the real reason, Pied Piper actually survived! All start-ups need their Jared to do the boring SWOT, SCRUM, and other silly Business Development stuffs to get their going with the fund! The Founders are the founders and not necessarily, the godfather of the business and they, especially they, need to learn and adopt this! Of course, they need to hire experts but only to help them to build a realistic vision of the start-up. Also, it’s their Financial Advisor that helps them manage something that is the nervous system of the start-up! Money!!
Let me explain you the concept of money in a start-up in a way that is very easy to connect:
Suppose, you got Rs 1,000/- from your grandmother on your birthday! With a happy mood, you set foot in the market wondering what you really want to do with the money. You really want to go to your best friends’ house who can help you decide how to spend it wisely because your friend knows you! On the way, you meet your grade six crush and you totally lost it!
You had resources to court her and to impress her of your expenditure stature today! You both, instantly hit it off! You guys started with watching a movie, had yummy junk food dinner followed by a romantic stroll with ice creams and then gave her some nice present for having her around on your birthday. She rewarded you with a goodnight kiss and it was the best day of your entire life! You walk to your home, sitting on your bed, still dreaming of the endless possibilities for your future before the next day begins!
You don’t have any more money to court your crush today! Your best friend can’t help you now because you don’t have that money anymore. Your crush abandons you because you can’t afford her anymore. At the end of the next couple of days you go to your bed either dreaming about your birthday, foolishly expecting Rs 10,000/- or may be even Rs 1,00,000/- from someone or sleep regretting how foolishly you spent your money. Your grandma refused you more money and so did everyone else. After a while, you got fed up and quit that dream, eventually.
This is what really happens to Start-ups! Founders and Marketing genius make one hell of an eye catching business plan that is almost flawless but always make one mistake of not including one dull concept that is an integral part of any business plan. 'Survivability'! Only a Financial Advisor with sound knowledge of start-up/entrepreneurship industry can really help you give this important piece of advice like your best friend. How would you survive if you don’t receive a follow up fund or create a self sustainable business model till the time your visions are not achieved instead of continuously creating bubble valuations and asking investors to fund you! Be it Plan C or D or maybe even Plan E, but it must be well thought out, structurally drafted and realistically executable without any external fund help and should still be in a sync with your vision!