Investor-centric design (and the path to startup failure)
Startups proudly boast about raising a few million dollars investment as if that means they’ve “made it”.
Raising investment is — wrongly — equated with success, and a sense that the business is now in some ways more “real”, despite an investment raise being no indication of whether that business is — or is able to — deliver any value to its customers (let alone enough value that those customers will be willing to pay for the product).
What does investment really do? Does it create value? Does it get you nearer to profitability?
Remember that investment is just money.
It’s money that prolongs your runway by paying your wages. It’s money that let’s you hire more people, in the hope that they can build a better product, or generate more sales.
But investment doesn’t build a business in & of itself. It doesn’t deliver value to your customers. It doesn’t help you build a business that delivers enough value to your customers that they are willing to pay for it.
Yet far too many founders conflate an investment raise with success. They focus on that one single goal. They commit all of their limited resources to it.
“What shall we build”, they say.
“How about that convoluted, pointless feature the investor thought would be a good idea, because it will make him happy!”
And so one feature becomes two, then three. And your team may find themselves in a very dangerous place:
Building for the investor, rather than the customer.
Building something for somebody who will never use it, and who doesn’t even understand all too well the problem you are trying to solve.
And when you find you don’t deliver value to your customers, you will find that you are unable to then make money from those customers, leaving your business devoid of growth or, worse, panicking to purchase growth through Facebook & Google ads with your hard-won capital.
If you find yourself in this trap, then just remember the following:
That the short-term never matters.
That, unless you are focusing on a business that has a robust foundation for success — one built on delivering enough value to the customer that they are willing to pay for your product — then raising investment won’t take you very far.
Maybe through to next year. Maybe the year after. Maybe you’ll even be able to then raise again, and stay afloat for another, but you won’t make it to the end. You won’t make it through to an exit, or to the point you have stable growth & profitability.
And, then, what would have been the point of it all? Stuck with your broken dreams, broken promises & a useless product that never really solved anything for anyone.
