To get funded or not?

One of the most interesting debates taking place recently in the start-up scene regards -maybe somehow expectably- the arguably most critical of dilemmas an entrepreneur faces: Should I get funded or not?
In and between the frenziness of meeting and pitching to VCs, raising the biggest amount of money at the least time possible, then getting really big and acquired or just sell out to retire young, a different -less opportunistic and literally closer to reality- school of thought has lately emerged: You typically do not need any external funding to get a simple working version of your idea, you’d better bootstrap from friends and family and then try convincing some real customers to actually pay for your product and keep you going, developing ang growing, instead of selecting speculators as partners in your company.
And the story goes on, you may take a look at the arguments of Paul Graham and the 37signals guys from Chicago (disclaimer: I’m a fan of both), or watch the by now infamous speech of David Heinemeer Hansson at the start-up school 08. The various opinions and experiences may be controversial on the topic, however I believe that a contribution of value is the one of Adam from Heroku (great platform for deploying a Rails app by the way), who has interestingly tried in practice both of scenarios and converged to the following insight:

It’s hard to separate out the variables {of comparing the two approaches}, but off the cuff, I’d have to say that being investment-backed is a lot better.

Adam points out two main reasons for that, being able to focus on your product development instead of being distracted by client-work and surviving a sanity check, this time by your VC. It seems apparent that, if you are able to raise some money, you should go for it. However, and expectably, David strikes back, “trust customers over VCs, you don’t need outside bets to launch a web business”, it keeps going.

To me, the bottom line of this running debate is just simple and it goes like that:

Not being funded is not a reason not to start-up.

In other words, managed to being funded or not, in either ways, go start-up. If people who do have the tangible opportunity of raising external funding do seem skeptical about it, then you do not have to be skeptical about starting up, even in a nearly VC-agnostic environment, like the one of the local greek market. Turn your idea into a prototype, find a couple of interested customers and keep working on that, your very own road to ithaca might end up at something sustainable by itself or -who knows- some actual VC backing…

 

PS: David made lately another interesting quote, at least to some of us who feel desperate of not being in the valley:

There’s not a huge start-up culture, not a lot of tech parties all the time that you can go to, no ton of VCs just walking over to have lunch with you. I think those are all pluses, net positives, {…} you just get down to work.

2 comments

  1. “Turn your idea into a prototype, find a couple of interested customers and keep working on that, your very own road to ithaca might end up at something sustainable by itself or -who knows- some actual VC backing…”

    I agree 100% it helps to develop the idea in the right direction.

    I made the mistake of the premature funding. The more sophisticated the product is, greater the danger is.

    What I learned is that you should not forget that when you got funded:
    – You loose some control over your company (and you should loose the least possible)
    – You get lot of pressure and it is extremely easy to loose the focus on obvious or important things (try to find the reasons of start-ups failures on the web)

    Take some time to validate your idea, get some contracts ready, simulate possible issues

    You and your idea will be more mature, and then, you will be able to negotiate a funding in better terms for your start-up.

    Good luck everyone :)

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