Quora raises millions (both dollars and questions). Facebook buys WhatsApp for billions. Uber gets another trillion in investment and is now “worth” a quintillion. Or a brazillion. Who knows? The news in the entrepreneurial scene, especially in tech, is usually loud and involves big numbers. It is so easy to get swept up in this frenzy that I’ve seen many a business builder spend more time at events than on making his or her own company something worthwhile. And goodness knows I’ve been there too.
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The main realisation is that most of the news is around the outliers, those who hit it big time. Most don’t. But that doesn’t mean most don’t make money, or run successful companies, or hire lots of people, or grow fast, or slow, or anything at all. It simply doesn’t matter.
Read more: Balance the hype and potential with the reality on the ground [U-Start Africa]
The advice here is to be very sure before taking on someone else’s money. In the vast majority of businesses, it is the wrong decision.
And so, turning to the question of investment versus bootstrapping, it is easy to become excited about hunting for millions to build “the next big thing” and exit for a number with even more zeros at the end of it. But in my opinion, it most often is not necessary or right. Investments waste your time and energy and doesn’t help you focus on building your business organically.
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Sure, there are cases where investment is either the right choice or the only way. The idea is often to raise capital and grow much faster, with a view to obtain an unassailable market position. Has Zando, with all their millions, done this? Maybe they are yet to do so, but after how long? Has Takealot done this? Companies like Yuppiechef grew steadily on a good strategy instead of greenbacks. It’s a hot debate in many circles nowadays.
The reason I tend towards trying to take as little money as possible is not so that you own close to 100% of your company. Good investors or partners are very important. It’s so that you can easily test your business idea, easily exit if you fail, and also grow naturally.
So be careful and think hard before you rush off with your polished slide deck. Most of the top businesses in South Africa didn’t grow up fast and successfully with loads of investment. In fact, regardless of investment, most startup businesses fail. Make sure that if you really want funding, that you’re doing it for the right reasons, and not because the latest TechCrunch or FastCompany article purports that everyone else is. It’s not the name of the game.
Image by OTA Photos via Flickr.
