The alluring world of free money, untethered dreams, and limitless possibilities. With an idea, a sparkly brand, and someone else’s funds…they march into the business world full of wonder and excitement.
Yet sadly, only about 1 out of 10 startups will succeed, and a shocking 80% of all tech and ecommerce fail in three years.
PE, VC, MINT, or Trust, millions of dollars are handed to start-ups that just evaporate into the ether. Little to no explanation is ever provided of where the dollars went. The who is almost always starts with “A buddy of mine…” and why?…well, Bless their little hearts.
If so many start-ups never make it, the obvious question is, why do people keep investing? Seems like sour odds. But any horse track will tell you a different story.
The real question is why they keep failing, over and over and over….
Unfortunately, every failed start-up follows almost the same exact recipe. The spices might differ slightly, but it’s the same stew.
The number one start-up fail? Spending money like the apocalypse is coming, and the money mint is running full tilt! Every single time!
Spending, spending, spending!
I’m not talking about marketing spend or product development spending…those are worth expenses. I’m talking about PARTIES!
I’m talking about Eames chairs for ALL, $100 sweatshirts, DJ equipment, stocked bars, $200k dollar web builds, 80” TVs in all offices, espresso carts, spa weekends…the list is endless.
Here’s the deal…that $1M, $2M, $20M…that is meant to last longer than six months. Those funds are to see you through the ramp and the inevitable rough patch.
It is NOT for custom pinball games!
Number two. Directly related to number one, but worthy of mention, HIRING. If you have a $30k monthly salary for a card game startup with 200 units in sale…you have a problem.
You do not need a Director of Customer Service when you have 4 customers. I know you are going to grow…I know you have big plans, but the “founder” can take that one phone call for a few months.
Stop building out an executive suite for $50k in sales…just stop.
And lastly, well, not really lastly, but lastly, for now, COMMITMENT! Startups do not happen overnight, not even in a month or a year…it takes YEARS to build a company and recognize a return. YEARS! Real years, not dog years.
It takes grinding your gears all day. And sweat! Not a cute workout sweat - a little glisten on the forehead. I’m talking about nervousness, anxiety, stress sweat that pours from your pits, and other areas not to be mentioned.
It takes TEARS of COMMITMENT to build a company from scratch…no matter how well funded. And probably some blood…..usually there is blood.
The amount of capital you raised is entirely irrelevant. Yeah, it is a big number. Yep, gonna be a jaw-dropper at a party…but it doesn’t matter…if you lose it ALL!
What matters, endures, and builds legacy is what you produce with the money. How did you grow the investment? What good did you give to the world? How have you changed people’s lives?
Yet time and time again, I sit across from “CEOs” spinning around in their Aeron, fidgeting with their latest ultra-expensive tech, rambling mindlessly about their “biz vision” (which consists of one slide with a pie chart) all while on speaker phone with their “Bruhs” planning the next PARTY, and once again marveling…” Dude, can you believe they gave us $4M?”
Honestly, I can’t.