Steve Blank recently blogged about Fund Raising is a Means Not an End. It was thought provoking.
I’ve been involved in 4 startups now, 2 of which were boot strapped by either angels or customers and 2 that were VC backed. Of the angel funded, 1 is still limping along trying to work towards scalable growth and the other was acquired due to strong customer revenues. Of the VC backed, one was fire sold to a bigger company so the VCs could recoup some of their investment. The other is doing great 🙂 but that’s a different topic that I won’t dig into.
I tend to agree with Steve’s take on raising funds for a startup. There’s something to be said about treating the money you receive as a gift, one that is funding your dream to build something akin to a blossoming tree that starts as a seed. Taking that further, consider how to build an orchard. Farmers start with young saplings planted in many rows and nurture them into adult fruit-bearing trees.
But how do they get saplings? They start from many seeds and tons of water. Even still, many of those seeds peter out. But some of them turn into the saplings that make it into the orchard.
The seed is like the startup and the venture capital the water and nutrients that help the seed grow into the sapling. More money doesn’t necessary improve the situation in terms of guaranteeing more saplings. Instead, what helps is constant experimentation to improve the efficacy in converting seeds into saplings. In the end, the experimentation results in a repeatable process that results in more saplings to grow the orchard.
To bring the analogy home, constant experimentation and efficacy improvement is what the serial entrepreneur is really good at. It helps to transform a temporary situation (the startup) into the scalable repeatable business we all want. And for that, money is the means. Not the end.