Today’s businesses have so many different funding options. There are angel investors, venture capitalists, crowdfunding options, and the list goes on. But all of those funding opportunities can’t help you if you haven’t built a self-sustaining business.
According to entrepreneur and venture investor Adam Callinan, this is a major problem for startups. In a post for Entrepreneur.com, he writes:
“The fact is that companies all over the U.S. are taking in huge amounts of funding with insane valuations, through various stages, and banking on the fact that they’ll be able to continue huge fundraising rounds without building self-sustaining businesses.”
So what does happen when all this funding stops?
In most cases, the businesses burn through their remaining cash and then fail. If you have no money and no way to make more, that’s really the only option.
To avoid all of this, startups have to work harder to build self-sustaining businesses instead of just more fundraising. (Hey, that’s the point anyway, right?) It may sound obvious, but shifting from fundraising to business building is a question of focus.
Start with Feedback
Callinan insists there’s one major difference between a company bent on perpetual fundraising and one looking to build a business. The first focuses on raising money to build a product or service they think a customer will eventually like. The second on gathering feedback about customer demand and building a product quickly to meet that demand.
Stick to DIY
Be hands on and try to start with things you can do yourself. Everyone wants to create an app, says Callinan. But unless you plan to code it yourself that means spending money. Instead, look for a product or service you can role up your sleeves and develop yourself.
Focus on Saving Not Spending
The key is to make your funds last as long as possible until your business becomes self-sustaining. Concentrating on saving money and developing your business model will take your focus out of the relentless fundraising cycle. That’s how to create a business that makes money from customers instead of taking it from investors.
Funding Photo via Shutterstock