Smart Money Chases Great Businesses – Not Vice Versa
In Silicon Valley, everyone wants to be part of the next big startup.Finding the best engineers, the most creative marketing teams and being connected with the top VCs is the reality. We’re seeing large sums of money being piled into start-ups, and the appeal of cash is very strong, especially for young pioneers aspiring to become the next Microsoft, Facebook or Google.‘Easy money’ may seem like the right path – but to build a successful startup that benefits everyone involved, it’s about balancing monetary need and timing.For example, if you take a large amount of capital all at once, your stock option pool gets extremely large and becomes diluted. This means each share is worth less, which in turn hurts the employees who are helping to make your company a success.
My belief is that you take the right amount of money at the right time. Think of it like shifting a manual gearbox: first gear takes you to a certain speed, second gear takes you to the next speed, and so on. You need to figure out the stages for your business and plan accordingly for funding. This way, you are taking funding on your terms, rather than when your bank account gets low.At Egnyte, we’ve focused on building a strong team and solid product first, and we’ve received funding in small increments along the way to support our business strategy.We’ve been careful to remain focused on developing a solution for business from day one with all the security and functionality that a company would need to move everything to Egnyte. This means staying steadfast in not succumbing to the allure of building a freemium service that would make us try and serve two masters.We’ve also received funding to strategically assist with our growth plan. Taking on hundreds of millions in funding just dilutes your option pool and sets the bar far too high for a startup. Like the old saying, slow and steady wins the race; it’s about finding a good balance for funding and growth.So for all you entrepreneurs out there: before looking for funding, justify your needs with strong results, reasonable growth strategies and the strongest team you can find. Start with your sweet spot – your product or idea – and slowly build out your solution. Take money strategically when the time is right, and you’ll set up your business - and everyone involved - for long-term success.*Original post appeared in Growth Business.
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