Does VC Funding Guarantee Success?

Receiving venture capital or angel funding means that you have money in the bank to build your business. It does not mean that your business is successful. This...


If you were paying attention to tech news in recent weeks, you may have come across an interesting article written by Alyson Shontell over at Business Insider. Shontell’s discussion stemmed from perspective on the final episode of Bloomberg’s ‘TechStars.’

In a prior show, audience members and participating entrepreneurs showed enormous support for companies that raised venture funding while they were not as excited or nearly as supportive to companies that succeeded through organic growth via sales revenue. Notable tech investor and entrepreneur, Gary Vaynerchuk, pointed this out and expressed a contrasting view.

The Tech Community Has it All Wrong

As I watched this segment, I too came to the conclusion that the tech community has this thing all wrong. We, myself included, tend to celebrate companies who receive millions of dollars in funding as if the funding is the accomplishment of a business. When companies fail to raise money or choose not, but still create a successful business, we aren’t always as excited. This is flawed logic.

Receiving  venture capital or angel funding means that you have money in the bank to build your business. It does not mean that your business is successful. This distinction seems to be neglected by many.

Funding is Just the Beginning

If you read the ‘big’ tech blogs on a regular basis, it is likely that you’re bombarded by the countless articles touting how Startup ABC just raised $5 million from Venture Firm XYZ. As this always makes me feel happy for the founders, I realize that their work is just beginning.  They now have the responsibility to provide monetary value to their shareholders. Furthermore, they have less of an excuse (from the public’s perception) for failure. Face it, if you were handed that type of money and you failed, people will wonder how you blew it.

For the entrepreneurs who have not raised money but have built profitable businesses, I tip my hat. Also, I say ‘I’m sorry’ as I acknowledge that I have been caught up in the funding hype at one point or another. Truthfully, I value hard work, with or without funding. However, for the company that built a successful business without external funding, I do view with more of a blue-collar appreciation.

A Cautionary Tale

As this year has proven to be the year of high valuations and a ‘frothy’ investment market, we will soon see how the multitude of startups that received funding will play out. I wish them all the best, but heed caution to the startups that have yet to raise capital. Do so with caution!

Know that funding is step one and it is the point where the real work begins. Whatever you do, build a great product or service that your customers can obsess over. If you do that, the rest will work itself out.

 

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Photo Credit: amagill

 

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