Twitter Summary: Happy to report there is still “No Magic” in how to fund and keep a start-up going.
Repeating the obvious, to keep a startup alive you need to bring in more money then you spend, and you need the determination to keep up that effort. I recently received documents from a two year old start-up summarizing the steps the company has taken to keep itself alive. In the past year the company looked to raise another round of funding, but with issues surrounding raising money for advertising based startups, they were not able to get a valuation the founders and the seed round investors deemed reasonable. Rather than dilute themselves or run out of money, they chose to: a) Eliminate staff to just the founders, b) Reduce and eliminate compensation to those founders, and c) Take consulting opportunities that are related to the company’s mission but not directly to their goals to sustain the business. These consulting opportunities relate more to the expertise of the founders, rather than the goal of the company. They acknowledge that this is not the original long-term plan, but fortunately, the consulting clients are potential future customers of the company’s product.
In reading “between the lines” of the documentation, I could see that there have been opportunities for the founders to just call it a “good try “and move on to other startups, jobs, or consulting without the overhead of funding this venture. However, the team is determined to keep on with their mission, and found a revenue source that was “good enough” to help bridge and get to their eventual goals.
Paul Graham’s essays about startups is one of my favorite reads about how start-ups succeed and fail. More important than brains is the commitment to deliver on the goal and to do everything it takes to support the startup. The decision is actually easy: If the money truly runs out, and there are no consulting opportunities, revenue or additional funding, then it really is time to shut the company down. If revenue can be assembled then the next most necessary element is the determination to continue to deliver on the goal.