If you were paying attention to tech news this week, you may have come across an interesting article in Business Insider written by Alyson Shontell. It was a brief discussion that stemmed from the final episode of Bloomberg’s ‘TechStars’ show, in which audience members (and participating entrepreneurs) appeared to show applauding support for companies that raised venture capital funding while not being as excited or supportive for companies that attained success through organic growth and funding through customer revenues. One notable tech investor and entrepreneur, Gary Vaynerchuk, pointed this out and expressed a contrasting view.
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 creates a successful business, we aren’t always as excited. This is flawed logic.
Receiving VC 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. If you read the ‘big’ tech blogs on a regular basis, it is extremely likely that you will be 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.
As 2011 has proven to be the year of high valuations and a ‘frothy’ investment market (as a great VC coined the phrase), we will soon see how the multitude of startups that received funding will play out. I wish them all the best but waive caution to the startups who have yet to raise capital. Do so with caution! Know that the funding is step 1 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.