Why Funding Is Not A Right Indicator Of Startup Success

How will you measure the success of a startup: From the quantum of funding or number of customers? It’s ultimately the customer that matters. Unfortunately, people are making a mistake to judge it from the funding it gets. Indian startup scenario resembles this scenario accurately.

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A startup, in general, gets hyped after getting the first round of funding. However, it leaves the bigger question that whether it has anything to do with the success of the startup. How much customers care for such news actually. While writing the report, 6-7 startups had already got the first round of funding. It sounds amazing. But is it the reality?

They give a damn. Most of the consumers hardly care such business developments. They are concerned whether your product is actually solving their problems. Failing to do so means you will only burn investors money. If customers are not appreciating your product or service, the startup will fail.

Funding is, in fact, just a step in the directions. It just provides the fuel for some period. But it can’t sustain for a long-term. You can succeed when you generate a sufficient amount of cash from operations and profit.
The challenge for startups is even bigger and more profound as credible financial institutions hardly lend for them. When investors put money, they expect more than normal returns which put a lot of pressure.

Often startups lose sight of the main goal and indulge in attention grabbing. Housing.com is a good example. It did everything a startup should not do. It splurged a lot on an advertising campaign and hogged the media limelight for all wrong reasons. It was overhyped and lost its mojo very soon. Now nobody talks about them these days.

In case you fail to raise the next round of money and your shop shuts down, nobody will invest any money in your next venture making your life tougher. CredR co-founder, Sumit Chazzad says, “ We are very careful about investors money. That’s why we are avoiding to splurging money on things like television advertising.”

The point to understand is that money will only smoothen the ride for some time. If you don’t get customers, things will not be easy for you. The money will just propel you with more force in whatever direction you want to go.

If you have not found your initial customers yet, or are still wondering how to make them happy with your solution, then funding is not going to solve your issues.

You probably need a mentor at this stage or a right mix of the team that can execute the plan. According to a Business Insider news report, 93% startups funded by Y-Combinator fail and most of them worth zero. So only a handful of them become successful.

There is also a point to understand that a majority of startups founder are not interested in making their ventures successful, rather they want to raise its value and make a successful exit. The point to understand is that it’s extremely difficult to start a company and make it successful without funding. But a lot of companies have done it successfully.

Louis Beryl, th founder of Earnest, a consumer loan provider company, said after raising $75 million level B round fund, “Building a company is really hard. $75 million in funding is just the opportunity to build something great. It is not success.” He is very much right in his opinion.

VIKASH KUMAR

Chief Content Strategist

An active journalist and blogger with more than a decade of experience. He has worked with various national and international publications. Sharing behind the curtain news is his passion.

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