This question originally appeared on CoFoundersLab: Why is fundraising glamorized over making profits in the start-up tech world?
Answer from Elizabeth Charnock, CEO, Chenope and former CEO of Cataphora, acquired by Ernst & Young
Very simple: Organic growth almost never gives you a big wad of cash without doing a lot of work, both on the product side and the business side. It is slow, and you are bound to experience the usual setbacks (e.g. a customer loses their budget) if you’re B2B. Getting paying end-consumers is arguably even harder in a world where so much is presumed to be free, especially from start-ups.
Having millions of dollars to spend on nice offices, furniture, PR, trips to ritzy conferences, high salaries, etc. is glamorous. It just is. But it is based on a house of cards, rather than truly earned revenue.
By contrast, having to pay sales calls, negotiate contracts, chase customers to pay receivables, etc. is not glamorous at all. But you are vastly more likely to build a "real,” sustainable business this way, and you’ll be much less likely to crash and burn because you built something that has legitimate value. True, you are less likely to have a gigantic exit, but the vast majority of venture-backed companies don't have a great chance either. Plus, you and yours still have all the equity, so you profit much more from any exit.
Further, if you really have something of value that others can't replicate due to patents or technical difficulty, it doesn't matter much how much venture capital others have (at least not in markets in which the software delivering the promised value actually matters).
I bootstrapped a company to an eight-figure run-rate right in the middle of the Valley. Most people locally thought I was crazy, and indeed it was difficult. Building a real business from scratch requires real skills. But it was real, not a scam. And I learned a tremendous amount from it. We sold most of it to Ernst & Young for what was a reasonable exit. I now have another company, and we are bootstrapping it as well. If you have the skills and mental strength to do it, I absolutely recommend it.
Why is fundraising glamorized over making profits in the startup tech world? originally appeared on CoFoundersLab — the place to connect, meet, and collaborate with like-minded entrepreneurs.