Entrepreneurship is not for everyone.
Research suggests that entrepreneurship has gained much popularity. After all, more people are exploring entrepreneurship instead of conventionally securing employment under corporations or Small Medium Enterprises (SMEs).
This could be a consequence of mainstream media’s deceptively glamorous portrayal of the entrepreneurial journey. After all, news of startup fundraising and the growth of unicorn companies are covered more extensively in the media, while the reality of the entrepreneurial grind takes a backseat. With that in mind, is entrepreneurship truly a glamorous endeavour?
All in all, entrepreneurship is not easy to figure out. Most entrepreneurs will have their stories of adversity and business struggles to share. If you are new to starting up, you will need conviction in what you want to achieve and how you want to grow your startup and team.
A clear goal and a well-thought-out plan to success will help you determine whether you want to build fast, sell fast or develop a long-lasting business. These are some of the few factors that will also help you determine if you need to raise substantial funding or not.
So, what is the grind like behind the glamour of entrepreneurship?
Focus, focus and more focus
The fear of missing out (FOMO) is real. More often than not, I have seen entrepreneurs– including myself in the past– fear that if they don’t build another feature or app, they may lose out on market share and even a good chunk of their existing users.
If a startup or small business lets this fear drive the course of their business journey, they may end up spreading themselves too thin. After all, they don’t have much resources that can afford them the luxury to lose their focus on building more features or apps.
Most successful startups that I come across, only have one focus right at the start, such as:
- Google – to build the best search engine
- Mailchimp – to build the best email marketing tool
- Amazon – to be the world’s most customer-centric company
or even that famous hawker I frequent, who focuses on just one really good dish.
Focus is never easy. It comes with making tough calls along the way. Some tough calls may kill your business and at times, after knowing your odds, it is up to luck. Take Talenox (that I co-founded) as an example. During our second year in 2015, we made some tough calls:
- Cutting revenues from larger enterprises so we could focus on the SMEs market.
- Dedicating our resources to make Talenox truly self-serve, to ensure onboarding is scalable without need for manual intervention unlike our peers in the market
This move was a first in the region and it was really challenging due to the complexity of payroll and leave management. However, it was definitely a necessary milestone for Talenox to automate further and scale sustainably.
In addition to that, Talenox made the tough decision to stop developing our former Scheduler and Time Tracker modules further. This was done so we can truly focus our resources on HR compliance for Payroll and Leave. It also allowed us to ensure that we build in-depth localised features for each country so that we are one of the best in our niche.
Our efforts paid off in the coming years, as our peers were chasing to build features for various modules and some even tried to venture to insurtech and machine learning without much success due to the loss of focus.
You only have so many resources as a startup. To gain initial traction and to scale for growth, you’ll have to stay focused, prioritise well and optimise as much as possible.
Don’t add fuel when there’s no fire
Though adding fuel to the fire means causing conflicts, I’m referring more to adding fuel (funding) if there is fire (good growth). Without proven initial growth, it doesn’t make sense to raise funds to dilute the current shareholding and future rate of returns (ROR) of investors.
In the current climate, there is a ready supply of VC funds and the dwindling supply of good deals or startups in the market to invest in. This makes it relatively easier for entrepreneurs to raise funds to manifest an exciting idea and sustain the business growth spurt brought about by early-stage traction.
Indirectly, this creates an opportunity for financially-savvy entrepreneurs to ensure that their startup looks good on paper. However, their startup may not be sustainable, especially in the long run.
Let’s say you’re looking to grow a business that stays for the long haul. As you focus and get your initial traction to prove product-market fit, it is time to ask yourself the following questions:
- Do you want to build fast, sell fast or create a long-lasting business?
- Does fund-raising make sense for your startup’s goal?
- If yes, how much is needed?
Your answer to these series of questions will help you determine how you should raise funds.
Build fast, sell fast approach in entrepreneurship
If you are raising funds from VCs, you are planning an exit in five to seven years or at most 10 years due to the investment horizon of most VCs. You may have heard stories that once you have raised VC funding, it is all about numbers and getting growth at all cost.
Culture will be tweaked towards getting more revenue or Gross Merchandise Value (GMV), depending on the valuation metrics that your particular vertical uses. This is simply because VCs need to get the ROR for their Limited Partnerships (LPs); after all, VCs are investments that seek returns.
How Talenox created a long-lasting business
However, if you are thinking of spending time on building a really good product and only raising funds when you experience hyper growth, then you should focus on getting more revenue on board in a sustainable way and raise buffer funds to help you bridge your cash flow.
Funding can be from angels or family offices with longer horizons; alternatively, you can bootstrap if you are able to.
You will be surprised to learn that there are a number of well-known startups that have not raised funds or even minimal funding to grow.
Some great examples are Mailchimp, GoFundMe, Basecamp, Buffer and Zapier. What is even more surprising is that tech giants like Google and Apple (pre-IPO) only raised a tiny fraction of funds compared to that of “modern” unicorn companies.
For us over at Talenox, we monitor our growth and SaaS metrics pretty closely and we only raised very minimal funding to ensure that we can achieve a “steady state” with positive cash flow.
We do this because we noticed that pouring in funds to get more growth just doesn’t work well in the HR Tech industry in the region currently amongst our VC funded peers.
B2C vs B2B
For consumer-facing startups (B2C), I agree that funding is crucial as it is usually all about who can get the most mindshare in the shortest amount of time and create the stickiness to your product so that competitors will face greater friction to gain more market share.
As for business facing startups (B2B) it really depends on the region and the level of education for SaaS adoption in the region. Premature investments will usually result in an over expenditure to acquire users creating a much higher cost of acquisition than what is supposed to be healthy.
Both paths have their challenges and it depends on which path suits you most.
Entrepreneurship is a team marathon, not a solo sprint
Growing a startup is like running a marathon. You will need to pace yourself and not a sprint that you find yourself burning up within a couple of years. Many times, I see entrepreneurs burn out at the early stages of their startup. It is important to realise that very few startups like YouTube get acquired at the very early stage.
In fact, the whole journey of building a startup up is like a team marathon. You are not the only one running the race. You are also building a team with a culture as you run the marathon with them, supporting them and growing with them as they add value to your users and customers.
Usually, it takes time to build such a culture. It is even tougher to nurture such a culture if you are a fast-growing startup.
Many startups took a few iterations to get their culture right, while some just focus on growth at all costs and at the expense of culture. The issue with that is that you’ll have a bunch of mercenaries jumping onto the bandwagon to “get rich quick”. If it is the culture you can work with, then by all means go ahead and build that startup.
The mainstream media is filled with the glamour of successful unicorn companies and company exits. Before you kickstart your entrepreneurship journey, I encourage you to dig deeper into each story, perform your due diligence and reference checks to understand the stories thoroughly.
Entrepreneurship is never an easy journey and most have failed. Nonetheless, this should not deter you, but provide you a clearer lens of what you are getting yourself into.
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