Almost every startup seeks out for funding from the very first day and it’s natural for first time entrepreneurs to be hyper-focused on getting money in the bank and really happy when it gets there.
It is no surprise then that a new lick of funding can have you popping the cork on the champagne bottle. But this moment in time really is just the beginning. While one cannot totally discourage that, but I think founders are too focused on seeking funds from investors rather than building their processes and brand.
You can’t ask someone to sink ₦100 million into marketing for a company without a process. When the customers rush in, you and your team will crash out, give bad service and eventually mismanage all your new customers.
The headaches for an entrepreneur typically ferment when they jump at the first offer of equity from an investor, without giving proper consideration to the terms that are negotiated with that investor.
Rushing through the negotiation process in an effort get much-needed funding down the wire and into your bank account can mean giving up important economic and control rights without you even knowing.
Don’t forget that if investors invest in you very early in your startup, they will ask for a very large equity in your business. Any investor that takes 51% of your startup is ultimately the owner of that business and you do not have control anymore.
But if investors see that on your own, you have been able to scale your business from point 1 to point 2 to point 3, they can have confidence in their investment. They will be relaxed knowing that investing in you at that point 3 means when you are at point, say 9, their investment would have matured. And don’t forget that you have more power of negotiation when your business already has traction.
But then a lot of startup founders ask when a startup should start looking for investors. My personal advice is to start when you know you have a good, scalable process and demand for your product or services.
You need to learn some basic skills which will come along while running your startup. You will make initial mistakes and correct them. You will spend in the wrong places and use the wrong processes but in all, just ensure you have smooth operations.
When you’re building a business, don’t get obsessed with funding milestones. Your focus
should be on building a great company, your long-term vision and creating value.
By keeping the bigger picture in mind from the start, you’ll be in a better place to avoid dealing with the consequences and fallout of hasty early stage decisions later on, which will make for a better balanced company and better peace of mind for you.