Have been thinking whether not getting funded is a good thing or a bad thing?
Mike Tyson once said, “Everybody has a plan........until they get punched in the face.”
The key question is not how to avoid getting punched in the face. That will keep happening. The key question is what you do after you have got punched in the face. Do you get knocked out? Do you quit the fight? Do you get stronger and fight harder?
Money never hurts. More money comes with more investors to manage and exits to worry about in the long run - but in the short to medium term, it definitely makes it easy for the team to execute on their plans. Hopefully, the plans are in the right direction.
But what about less money or no money?
Assuming that you took care of all the hygiene factors (good product, team, customers, model, professionalism, ethics, etc.), here's why I think you should be happy you did not get funded:
1. Funding is not equal to validation
The folks managing funds don't know the future. (Surprise, Surprise!). Very often, getting funded is seen as a validation of the business model and hence, an early sign of potential success. Yes, it can be.
But it is not the only source of validation. And the absence of funding does not mean the absence of validation. The best validation is from customers. And from team members who stay on to fight the battle even if you don't get funding. Or finally, if deep inside you, you feel it still makes sense.
2. It makes you more focused
There are two options if you don't get funded. Shut down or Keep Going. Assuming you keep going, the absence of funding makes you more focused - on your customers, on your team, on what is working in your business. When you don't have money, decision making is also very easy. If any internal project needs money, the answer is "NO!", but it turns out that in most cases, the team goes out and gets it done anyway - without money.
3. It makes you turn profitable
Hey! It's not like you have much of a choice, do you? Either shut shop or turn profitable. Option 1: Not an option, Move to Option 2., Change strategy, "Pivot", Cut costs, Fire bad customers, Fire high-cost and low-performing team members, focus on good margins, keep good customers happy, and collect money on time, etc. All good stuff!
4. You realise that you are fine without funding!
You realise that customers are still buying, the team is focused and the business is growing. Yes, there’s stress on the system - but they can be managed with a lot less capital and some attention. And this builds the quiet confidence inside you that you can keep this going and growing - and do what you feel is the right thing to do for your customers and your team - instead of worrying about what investors think.
5. Some of the best businesses didn’t raised Venture/PE funding
They took their time and grew organically. Many of them tried to raise venture/PE capital and failed multiple times. So, conversely, if you did not get funded, you could qualify for this league.
So, again – You did not get funded? Congratulations!
Good luck riding the punches!