At any given time, I try to be involved with half a dozen or so startups as a director, advisor, or just shoulder-to-cry-on. Pay it forward and pay it back, y’know? One phenomenon that continually amuses me is how startup management manages to overlook the fact that once they raise money, their lives get harder not easier.
Everybody seems to have these odd, ingrained misconceptions that their world will ‘lighten-up’ substantially once the business money stresses are gone (how am I going to make payroll next week, how long can I push that supplier off, when can I hire person Y) and once the personal money stresses are gone (how am I going to pay the mortgage, how am I going to cover that credit card bill).
These entrepreneurs aren’t being dumb – it’s just an odd, repetitive trap that folks seem to fall into for some reason (I know not why).
Sherwin Williams doesn’t sell paint, they sell beautiful homes. Andersen doesn’t sell windows, they sell sunlight and views. Early-stage investors aren’t purchasing cool products and smart people with their cash – they’re purchasing a return on their investment.
Entrepreneurs need to not lose sight of this fact – both before and after they raise their first funds. This first money your company raises will change your company. For starters, you have a reporting responsibility you didn’t previously have. But most importantly, generating returns is really hard work. If it was easy, everybody would be doing it in spades – and they ain’t! So in addition to all the hard work you’ve already been doing, and will have to keep doing, on research, technology, operations, market analysis, hiring, and so on and so forth, now you’ve got to work your asses off to turn your chimpanzee into a gorilla and generate that return.