“I am keen to become an entrepreneur and am trying to understand how to raise capital for the first round of funding.”
It is very common to see a lot of entrepreneurs engage into these conversations in various networking events. This expression is also reflected in the top MBA applications of a lot of applicants who want to start something of their own in the short term future.
In the last 10 years, a lot of companies took an overdose of funding steroids, gained crazy valuations, publicity, and died without a successful exit. What went wrong? Wrong execution, inefficient teams and crazy competition are some of the factors that surface. However, what some of the MBA’s do not want to believe is that to just become an entrepreneur is not a goal.
Just to start a business and raise funds is not going to reflect very well on the report cards. You have to have the motivation to create the numbers, and returns necessary to keep the machinery going.
What one also needs to understand is that ‘becoming an entrepreneur cannot be a goal’. One can’t say: “I want to be an entrepreneur, and then pick up the hottest idea in the country, assemble resources to raise capital, and start running”. This will not take you far.
What is needed is a strong desire to solve a problem. Many MBAs fail to understand that the only way to make a startup successful is to add value to the lives of people who are going to be using their products and services. Being profitable is an outcome of the transactions people will do to make you cash rich. If you are not passionate about adding value and your startup is only absorbed in chasing subsequent rounds of funding, your cost per unique user will never allow you to reach a steady state. The lifetime value that you can get from all customers will always be less than the money you spent to get them.
{{/usCountry}}What is needed is a strong desire to solve a problem. Many MBAs fail to understand that the only way to make a startup successful is to add value to the lives of people who are going to be using their products and services. Being profitable is an outcome of the transactions people will do to make you cash rich. If you are not passionate about adding value and your startup is only absorbed in chasing subsequent rounds of funding, your cost per unique user will never allow you to reach a steady state. The lifetime value that you can get from all customers will always be less than the money you spent to get them.
{{/usCountry}}Look at companies such as LinkedIn, Uber, Airbnb, Amazon, Naukri.com, Firstcry.com and Paytm and try imagining a life without some of these. You will realise that all of these have added value to your life in some way or the other and you are used to their products and services. You made them successful.
I am not suggesting that MBAs turn philanthropic overnight. You do not have to if you do not want to. However, if the intentions of your startup are not to add value to people’s lives, you will not have enough juice to create a self- sufficient company. Neither will you be able to convince the right set up people to buy your products, to work with you or to invest in you. It is not hard for the world to see through a company’s intentions.
Do not become an entrepreneur for short-lived valuations. Identify a problem that you really want to solve, and run after it.
If you strive hard to create real value, you will make this world a much better place and will have a rock-solid balance sheet.
The author is CEO and founder of PythaGURUS, an education consultancy. The views expressed by him are personal.