It wasn't that long ago when I owned Workyourcareer, the now defunct online job board. I was trying to gain traction for the e-commerce company in an otherwise crowded marketplace (as a point of reference, there are 50,000 other online job boards out there). I always thought, "I have a great idea and customers will love this -- I just need some money to advertise and get new customers." Furthermore, I truly believed that with having already plowed a bunch of my own money and sweat equity into it, that investors would see my vision and would be tripping over each other to fund Workyourcareer.
Co-founding SayHired has made me realize how naive I truly was.
With SayHired, we've built a bonafide technology within the staffing space (i.e. not just another job board), which actually has paying customers and a huge marketplace for recruiters to use the tool to save them time and money. In other words, while we haven't scaled to millions of dollars in revenue, we certainly have gotten some proof of concept and usability among customers, along with a definitive revenue model. And yet, our company is still probably not what most VC's or Angels would consider "fundable" yet. Why is that?
Well the main issue, which is actually beyond our control, is the industry that we're in. Staffing and recruiting isn't as sexy as social networking, mobile technology, or location-based tech. It doesn't have the potential to have 400 million users actively logging on every day to it like Facebook does. However, other factors that are in our control are important for us to achieve before we can break past that barrier and become fundable. These factors are also true for any start-up, and are as follows:
1) Initial Customer Acquisition is something we need to achieve on our own, NOT through funding. In other words, NEVER count on investors to fund your initial customer acquisition growth. Asking for money to get to X customers will never work. What investors want to see is that you have spent some money and have already gotten to X number of customers, and by them putting money in, you'll then get to 100X customers.
2) Momentum through revenue growth, partnerships with top companies, etc. is also critical. Investors want to see that month over month revenue is growing, even if it's only from $1,000 to $3,000 to $5,000 to $7,500. That's better than seeing 12 straight months of revenue stagnate at $10,000. Also securing deals and partnerships with recognizable brands is critical to the momentum factor, and shows validation that other people believe in what you're doing and want to be a part of it.
3) Developers, developers, and more developers -- if you're a start-up tech company looking for a $500K or $1M investment, you’ll need to show a rockstar team of developers that will be able to implement technologies that your customers want, and will be able to scale with you as you grow. Sales, Marketing, and Operational people are meaningless. If you have one Business Co-Founder, and 2 kick-ass Developer Co-Founders, that beats out a team of 3 Non-Developers any day. So be sure to surround yourself with top Hackers, or forget about it (Caveat: Developers are always in high demand and there are usually 10 Business people for every 1 Developer, so you have to have a great product or idea to attract anyone solid).
One thing that I think is a myth that I want to debunk right now is the whole garbage about "defensability." Defensability is a pile of bull. If you get that line from investors as to why they don't want to invest (i.e. your idea isn't defensable), you know that they're using that as a cop-out for a different reason for rejecting your idea. Thousands of start-ups get funded with no defensability at all. But the one thing that those start-ups all have in common is a solid foothold on numbers 1-3 above.
So the point is, if you don't have customer traction, momentum, and a strong development team (among other things), don't even waste your time looking for funding, as it's not going to happen. Instead, focus your time on building a great company with products that your customers love and want to keep paying you for time and time again. Then, and only then, can you start approaching investors for seed or VC funding.
0 comments:
Post a Comment