Investors and startups
When teaching “Entrepreneurship” in Asia, I heard many students complained: “The reason startups in the U.S. succeeded because they have investors who give them money to start the company. In Asia, it is impossible to get funding, and that is why there are few startups here. Most startups failed because of the lack of money.”
I explained: “From my own observation, startups do not fail because the lack of money but they fail because they do not have customers.” I know many successful startups never received any funding or having investors but still do well. Startup textbooks often mentioned having investors as the requirements for startups to succeed. Many people who teach startup seminars create a false notion that “Have idea, build a product, get investors’ money, then start the company with someone money.” That is not correct. Bill Gates, Steve Jobs, Michael Dell never received any money when they started their company. Only when they succeed, people began to invest in their company to help them grow bigger.
To succeed, the startup must begin with having a customer first. If there is no customer, there is no startup. Having investors early is a bad idea because investors want to make money, and they often want to control your startup. They will create more problem for you than you can imagine. When you use your own money, you are more careful to get the thing done than having someone ‘s money. Technology changes fast, the market also changes fast, and startup must be flexible and changes accordingly. But investors are always afraid of losing money, and they will not allow you to change, and conflict between investors and founders will destroy startup quickly. My advice is to focus on customers rather than investors. It is important to focus all your time and efforts to find customers, the more customers, the better. Only when revenue is flowing in then you may need to have investors to help you to grow the company bigger.
The startup is about business, smart people understand that the changing market is a good opportunity but also high risks. If you do not like risk, you should not think about startup. If you do not have deep technology skills, you should not startup. The startup is a risky business with many up and down, you should know yourself before think about startup. Do not allow others to convince you that if you can code, you can start the company. That is not a dream but a nightmare. The fact is for every hundred startups, only one or two succeed, what happened to the others 98 startups? You must ask yourself: “Do I have the knowledge, the skills, the courage to travel on this adventure?”
Sources
- Blogs of Prof. John Vu, Carnegie Mellon University
