LC024: Fundraising vs. Profitability

launchpeer - June 28, 2018 - 0 comments

Today’s question:

Today’s question comes from Mike. I’m having a hard time justifying raising money for my startup. It seems like everything I read glorifies startups who raise money but aren’t yet profitable. Why is that?

Jake’s answer:

Firstly, if you are having a hard time justifying raising money, then you shouldn’t. You should only raise money to fuel the engine, not build the engine. Too many startup founders focus on fundraising to build their product without already measuring viability or getting any traction.

There are so many startups that raise money that don’t need to. Too often, the money doesn’t get used well, so I’m not sure why it’s glorified so much. I’d much rather read about startups that reached a certain MMR or other profitability measure than ones that secured a huge round of funding.

I wish it was held up on a pedestal more when startups reached revenue versus getting funding. It makes early stage founders think that’s what’s necessary. And it’s not the only path. That’s not to say that you shouldn’t raise money or that you don’t need to raise money, but it should be a balance of those alongside the ones about companies reaching profitability and hiring employees, etc.

Fundraising isn’t the only Success Measurement

If you don’t need to raise money, don’t raise money. Hold yourself accountable to this within your own community. Ask questions about profitability and about revenue. Make it clear that you believe there’s more to the story than just how much money they can raise. Just because you don’t raise money doesn’t mean you aren’t successful. It can be a success marker, but it’s not the only milestone.

If you don't need to raise money, don't raise money. Click To Tweet

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