I have seen this cycle happen over and over again. There would be a set of guys who’d be around in most barcamps and social circles and someday they’d decide to start a company, and eventually build a product that’d gain quite a bit of traction from the “first adopters” that you find in barcamps, MoMos etc and then the worst thing happens – they get funded.
I have stats that show that more than 80% of companies whose growth and traction flatten out after getting funded by a VC firm. I’m asking myself the question if the founders were such shrewed and capable executioners that they planned the entire stunt just so that the popularity lasts till they get funded – but I doubt thats the case. So what then?
I came across a note where someone mentioned that people who get funded barely go back to the social circles after that. Partly cause those circles disown them because of whatever has happened to them. VC funding is not the golden egg, its more of the long-term, high interest, loan that is given to a company hoping that it would make it big, but for most folks getting funded is the end goal and such folks starts treating companies that have gotten funding as if they are Cinderella’s step sisters. The welcome is not there anymore, and there is no reason for these founders to go back to those circles anymore. They retire to the boring life of going out to meet peeps in baristas and coffee days where more pleasantries are exchanged than the actual meaning or weight of words.
This is actually very bad news. For the funded startup its very much so cause these early adopters essentially have dropped a baby on its head, just when someone agreed that it had potential. For the rest of the community, its also very bad since its a loss of a resource who probably had figured out how things work here and most certainly had knowledge worth sharing.
If you think I am just randomly spewing out stuff, I’ll make the entire point with one reference. J’lo’s single titled “I’m still Jenny from the Block”. That pretty much drives the point across. When your folks on the block are essentially who your early adopters are, and they disown you, it becomes radically hard for your company to survive without burning hard cold cash to see if someone would take you in for some cash in return. In the language of the hood, there is no love from the brothers no more.
I for one think that VC firms should stop advertising the amount they invested. Startups that get funded should make this a mandatory point with their investors. I know quite a few firms, like Ixigo for example who have gotten funding, yet not knowing the amount keeps things quiet, calm and life still goes on. Take any company that you know of [ and probably hate ], saying millions have been funded and crazy things like that and all of a sudden I am wondering if someone “deserves” that sorta valuation. Everybody thinks or says it out loud that its unfair and a lot of enmity grows in this little pool for absolutely no reason whatsoever.
Some companies would claim that announcing the investment amount adds credibility that will get you clients. Who are we really kidding? When you are small you need to embrace your brotherhood close to your heart and they will be your first set of customers whether you like it or not. An enterprise is a hard sell and probably is only worth aiming at when you are looking at your second round. If it happens, I’d be extremely happy but do be prepared to know and realize that your first set of customers are all folks you know, startups and SMEs. By the second round, you’d have grown to a much different positioning and would also have the strength to stand on your feet that you’d survive, and also would have weaned off the support system by then.
Until then, make no mistake, you need your community and the community needs you. Some things being in secret will make that happen.
Note: The media loves to flaunt numbers. So if you are not going to disclose numbers, don’t be surprised if they don’t run your story. Its okay, they too need to evolve, understand and adapt.
A Repost from the Author’s Personal Blog, The Startup Guy.
- Launching an Experiment to Spot Problems Worth Solving - November 2, 2015
- Introducing In50hrs Healthcare Edition - May 14, 2014
- Ideas Pitched / Prototyped at In50hrs Pune 5 - September 16, 2013
Good job done. I do not agree with the point that if we announce the amount invested..then companies credibility will go up….Never..companies credibility depends upon how they deal with customers…Even Reliance is at the bottom on that scale with billions of dollars in hand. 🙂
@Kartik: I need to keep my team close to me when you are around 🙂
As its said, Its all about networking.
While it maybe premature for me to comment on this because, i’ve not been blessed with funding so far partly because I have not tried hard enough, I think its networking at the right place for the right purpose that matters. So while at a entrepreneurship focused camp, discuss alliances instead of jobs and at a industry specific seminar try poaching rather than alliances.
Do what the situation demands and take conference parties as just another place to grow your business. The passion to succeed is what defines success.
I agree that the priorities shift, and now that its not about survival, the focus shifts to growing to more greener pastures, expansion etc etc and true the focus does shift – but I am wondering if that focus switch totally is beneficially. Perhaps it should be expanding that focus, than totally turning off on one and on on another.
As for the sample size,I am not saying they never grow – they obviously do, just not as fast as they were before. There seems to be almost an immediate dip in the popularity and traction. I donno, maybe I am wrong, maybe not. I wish its not true.
I could cite examples, but I dont think thats beneficial. Will stay away from that 🙂
Vijay – I agree that some of the start ups after getting funded might not come to events like MoMo/Bar Camp. It might not be lack of interest but different priorities. Because now they are not looking for early adopters but looking for a bigger market. And they have some flexibility in attracting those customers.
I don’t agree your another observation of funded start ups don’t grow. It might be a sampling issue. We all know that this is a high risk business and 50% of start ups fail even after securing funds from VCs. Thats the nature of the business. Increase your sample of companies and you might see some different picture.