Unicorns and trending startups. These are the great attractions of this age. There are thousands of startups in hundreds of industries, most of them developing apps or platforms to make our lives even better, be it through affordable temporary housing or just an easy way to unfollow people on Twitter.
Most of these startups operate on venture capital; they raise money from investors in return for a certain percentage of the company shares. Raising venture capital reduces the risks of the founders, is safer (for the founders) in case the startup fails, and lets the founders focus on growth and customer acquisition instead of dealing with the nitty gritty details of monetization and revenue growth and so on.
But, sometimes, it does feel like we are in a world with too much money being invested in the most ludicrous of services and tools. It feels like startups that really need the money are being ignored and most of the investments are directed towards startups that solve a momentary need and have no probable future revenue model.
As I’ve said earlier, raising capital infuses the startup with money to operate, hire people and to make the initial investments it needs in order to grow. But by moving the question of revenue models and soruces of income to the backburner, startups are putting themselves in a dangerous position. They are running on borrowed money and on borrowed time.
All too often, ideas come in a flood and people get to work on them in an instant without really thinking them through. I’ve had such an idea that, left alone for a couple of weeks, seemed really stupid. I believe, instead of rushing to flesh out the MVP for every idea that comes into your mind, people should think it through for a couple of days before committing to it.
Even when working on an idea, the question of monetization should always be in the mind of the founder. If you want to build a company that lasts several decades, you need to have solid earnings, because, let’s face it, investor money won’t keep you running forever. Also, investors expect to make a profit on their investments in about ten years. Unless you, as a founder, do not try to find a reliable stream of revenue for your startup now, rest assured, you will still be looking for it ten years down the line.
I’m in no way an expert on startups or investing, but it’s just common sense. Stop running on borrowed money and time, and create huge value for your customers. This is how you will get loyal paying customers. What are your thoughts on this? Spotted a mistake, or am I plain wrong? Let us discuss in the comments below.