Knowing When to Quit
This article is about the dark side of raising money. And I don't mean those shifty-eyed characters who want to take advantage of your vulnerability. What I'm referring to is the ability of an entrepreneur to recognize when their business goals may be unrealistic.
Every investor sees about 100 new deals a month. On average, only about two to three percent will get funded. Some of the remaining companies may eventually succeed, but by far, the majority will never get funded. How and when are they supposed to adjust to that reality? This story is for them.
The birth of an idea is a beautiful thing. Watching it grow, gain acceptance and become a tangible--and profitable--reality is more thrilling than anything you can imagine. Yet, for most entrepreneurs, the path their dream takes is often more arduous and frustrating than they imagined, suffering frequent setbacks, delays and disappointments. More days than not, the entrepreneur is left wondering whether or not their dream is worth the sacrifices they make. The hardest part is deciding if one more day will really make a difference.
This article is being written with the greatest amount of admiration and respect I can muster. If you're reading this because you're on the verge of deciding to quit, I feel (and have felt) your pain. Believe me, it's not my intent to talk you out of your dream. In the long run, only you will know if it's time to give up the ghost. All I really want to accomplish is to help you realize if it's gone too far. There is such a thing as an entrepreneur's vortex, and if you've been sucked into its grasp, your extrication will not be easy.
The first step to recovery is to admit you have a problem. To get there, you're going to have to ask yourself three tough questions:
1. The Entrepreneurial Dilemma: If my idea is so good, why is it taking me so long to succeed? This is usually the most difficult of all the questions to answer honestly because it goes directly to the root of whether or not your idea is really all that brilliant. Here are a few clues that your idea isn't that great and may not get funded:
- If none of your closest friends or relatives have invested a dime--or even expressed any interest
- If the total amount you've been able to raise is less than $25,000
- If no one wants to join you in your madness and work for free (or stock)
- If no customer has been persuaded to buy your product or service
- If your intellectual property attorney said there was nothing worth patenting
- If the last investor you presented your idea to asked if you were joking
- If you've been doing this for more than three years and still can't support yourself
- If you've been doing this for more than three years and the company hasn't hit break-even
2. A Question of Priorities: What am I sacrificing, and is it worth it? This second question is always hard to address because "hope springs eternal" and the hoped-for gain--to be funded--is presumed to be of great value. The challenge is to focus on the actual "birds" you have in your hand and to ask yourself if (a) the birds in the bush are really worth what you're having to sacrifice and/or pay for them and (b) are there really any birds in that bush after all? Here's another set of questions to help you figure this out:
- Does your spouse still support and believe in your dream?
- Are your relationships with your family, relatives and friends still intact?
- What sacrifices has your family made for your dream, and do they think it's been worth it?
- What has been the total cost of this project in terms of lost income, savings, loans, missed opportunities, and so on? When you add it all up, does it still make sense?
3. The Happiness Quotient: Does it still give me joy? The last thing you need to decide is whether your passion has become your pain. If it just isn't fun any more, you need to seriously question the sanity of your efforts. Here's my last set of questions for you to consider:
- Do you ever think of doing something else?
- When you're being really honest with yourself, have you thought that maybe you're just doing this to prove you can or (worse) because you can't admit you've failed?
- Are you afraid of disappointing yourself and others who believed in you?
- Are you afraid to admit it just isn't fun any more?
Here's my advice. Go through the above questions alone, and in the process, have an honest, heart-to-heart talk with yourself. Then, regardless of your decision, share your thoughts with your spouse or a very close friend. Finally, find someone whom you respect, someone who's qualified to advise you and won't be afraid to give it to you straight.
If all of you come to the same conclusion--that attempting to get funded at this point may not be the best idea--then act accordingly. Perhaps one solution is to forget about seeking funding and just focus on generating sales and building a profitable company. And if your decision is to continue down the funding route, just realize that you may have a road of disappointments ahead of you.
Jim Casparie is the "Raising Money" coach at Entrepreneur.com and the founder and CEO of The Venture Alliance, a national firm based in Irvine, California, that's dedicated to getting companies funded.