startup success stories

Every year, about millions of new businesses are started, and fewer than one percent successfully raise venture capital (VC).

Whether it’s the feeling of acceptance into this elite club, or the misconception that it’s impossible to start a new business without millions in capital, many startup founders find themselves hypnotized by the pursuit of VCs and angel investors.

Perhaps the adage is true: We want what we can’t have. And yet it can be argued that your chances of success are greater if you stop looking for VC money and focus your energy on bootstrapping your business and attracting customers.

Here are seven reasons for budding entrepreneurs to give up the hunt for venture capital and angel investors:

1. You haven’t proven your market need

Sure, you’ve put together a pitch deck, business plan and financial projections, but those are all just that — projections. You’re basing the future success of your company solely on hypotheticals.

Before looking for VCs, prove that there are customers out there who want what you’re selling. Spend time talking to your users, and focus on giving them what they want. Invest your time in finding a place in the market before trying to convince investors to give you their money.

2. You lose control

Once you secure VCs, you’re at their mercy. Even if you maintain a majority stake, you’re giving up a percentage of equity, profits and control to a board that may have a different vision for your company than you do.

In most cases, your VCs will ask for one or more board seats giving them the right to vote on or veto key decisions that will directly affect the future of your company. These same people also have the right to fire you or members of your team, which means you could be ejected from the company you started.

3. You’re focused on the investor – not on your customer

Giving up control means you have a new responsibility. Your first priority is no longer to your customer, because your investors expect to come first. Among other conditions that are negotiated in a deal, venture capitalists can ask for anti-dilution protection, dividends, liquidation preferences, mandatory redemption and other perks that the founding partners may not even get the rights to.

In some extreme cases, VCs have the right to sue you for everything you own in the case you forget to tell them “bad news,” according to Bloomberg Business.

4. Instead of trying to make money, you’re trying to raise it

The irony of trying to raise venture capital is how much time you waste chasing down investors – when you could be chasing down customers. There are only so many hours in a day and only so much work you and your team members can take on. Every minute you spend chasing down a flippant VC is a minute you’re not working on creating a great business.

That’s all to say you’re putting a lot of your eggs into a basket that the statistics say you’ll never obtain.

5. Your burn rate is higher than if you were to bootstrap

What’s a burn rate? It’s the amount at which a company spends money, especially venture capital, in excess of income.

You may know the now viral story of CEO Maren Kate and the downfall of her company, Zirtual. She abruptly shut down all operations due to a glitch in the books that was overlooked. Basically, the company did not have a handle on its burn rate – and it ran out of money. This also supports the next point that…

6. You lose the hustle required in running a lean business

When playing with someone else’s money, many startup founders admit that it becomes less real. It’s harder to stay lean and savvy with the false impression that you’re rolling in the dough.

Investor and entrepreneur Gary Vaynerchuk writes: “Twenty-five to 50 percent of all the businesses I have ever looked at were more than capable of being a little scrappier.”

7. Your end goal is focused on an exit rather than building a company that will last

If your end game is growth over profit, then you are forever stuck in a cycle of having to raise more money. As soon as you’re no longer able to secure more from VCs, then your company will likely implode.

You’re relying on other people’s belief in you – based on hypothetical projections – rather than relying on a solid business model that turns profits and creates happy customers.

Author: Shannon Whitehead

Shannon Whitehead is the founder of Factory45, an online accelerator program that takes sustainable apparel companies from idea to launch — without raising venture capital. Committed to improving the fashion industry, Whitehead launched what was at the time the most successful fashion project on Kickstarter and now helps other fashion entrepreneurs bring their ideas to market.

Image credit: www.fortunebuilders.com

This article was originally published in Entrepreneur.com

How do you ensure success? Who stands out from the crowd? What separates the pros from the amateurs?

There aren’t any definitive answers. And I’m not even going to begin to try and analyze them. What I will say, is that over the years, I’ve been observing. Working with startups and entrepreneurs on a regular basis has provided rare insight into what makes one person get ahead of the rest.

Here are five way to set yourself up for success that go beyond conventional wisdom:

1. Make it easy to help you

Most people are excited and willing to help out new entrepreneurs. But the likelihood of connecting with someone who is more seasoned in the industry is largely dependent on how you make the “ask.”

The first and most obvious way to sabotage yourself is by writing an inquiry email that scrolls on for block paragraph after endless block paragraph. In most cases if you’re looking for advice, the person you’re seeking out is busy.

Keep your email to no more than two to three short paragraphs. Your chances of getting a response are incrementally higher and you’ll come across as more professional – and more effective.

Bonus tip: Ask a specific question. Avoid using phrases like, “Can I pick your brain?” Instead, ask the exact questions you want to know the answers to. Once you have your foot in the door and get a response, you can follow up from there.

2. Write thank you notes

They don’t have to be handwritten and shipped via snail mail, but if someone takes the time to jump on a call on your behalf, follow up with them.

Regardless if the advice was good or not, it’s common courtesy to express gratitude to someone who gave their time to you.

This is especially applicable when a contact goes out on a limb to introduce you to someone. It makes that person and yourself look bad if you don’t take the time to follow up afterwards.

Good things come from gratitude. And the most successful entrepreneurs show how much they value the people who helped them along the way.

3. Start before you’re ready

Should I launch now? Should I get more real world experience first? Should I go back to school? Only you know the answer that’s right for you, but my recommendation to most aspiring entrepreneurs is to start before you’re ready.

Building a business requires a long runway. It’s not only about the amount of hours in the day that you spend on your business, but the months and years that you take building up to it. As I tell my entrepreneurs (on repeat), launching a successful company is a marathon not a sprint.

The sooner you can start fleshing out your ideas, seeking out mentorship, connecting with industry peers and educating yourself, the better off you are in the long run. The old cliche usually holds true: Tomorrow you’ll wish you had started today.

4. Be consistent

The entrepreneurs who get ahead are calm and collected. They’re methodical, they’re strategic and they don’t get easily frazzled.

When you’re first starting out, your attitude and the way you handle challenges are going to dictate how you respond in the months or years of your business to come. The entrepreneurs who get ahead know there is a solution for everything. And sometimes the solution falls under the guise of a better option.

Building a business is not an overnight endeavor. It requires consistency of action, which means not giving up if something doesn’t work the first time.

5. Ask for help

Nobody builds a successful business by doing it on their own. That’s right, nobody.

The entrepreneurs and mentors you see are all getting help, seeking out mentors of their own, building advisory boards and seeking out further education.

Solopreneurship is a farce. If you want to get ahead, then you have to seek out help from others and continue to invest in yourself. That’s what separates the amateurs from the pros.