Page 144 - 6 Secrets to Startup Success

Your Math Story 123

demand for your idea; and if you have planned with rigor and realism
and have worked out a compelling math story, why wouldn’t you do
what it takes to fully fund your plan’s success?

I do observe, on a regular basis, the dangers of unchecked spending.
But spending too much money, per se, is never the real cause of new
venture failure. The cause is spending it on the wrong things, which
typically means overspending in some areas and underspending in oth-
ers. Lynn Ivey now regrets not putting more money into upfront mar-
ket development and proving that her high-end concept would fly, and
she would avoid pouring upfront funds into a fixed real estate asset.

Here is a set of principles to help you think about funding your
venture, whether that funding comes from personal savings or outside
sources:

9 Take the long view. Work to understand the longer-term
implications of your funding decisions. Too many
entrepreneurs solve today’s problems in ways that limit
future options. For example, raising your initial money by
getting small donations from a large group of friends and
family members may be the easiest approach in the short
run, but you may regret it later, as more sophisticated later-
stage funders often avoid deals with large groups of
investors attached.

9 Understand your control needs. Few funding sources come
without some loss of control. Are you willing to cede total
control and build your venture under some form of
investor or lender oversight?

9 Dig the well before you are thirsty. Raise money before you
need it. Nothing scares away investors and lenders like an
entrepreneur in financial crisis. If you have developed a
clear math story, you should be able to anticipate where
critical investments will be needed to get your business off
the ground. Because raising capital usually takes longer
than expected, wise founders are always thinking about
future sources of funds and cultivating those sources.

American Management Association • www.amanet.org