Lessons on Small Business Funding and Growth

by | Oct 7, 2014 | Business Entity

Denver Startup Week 2014

Recently, two really interesting articles have been published regarding the difficulty of growing and/or scaling a business.
The first, titled “Startups Can Be a Struggle,” summarizes the September 18, 2014, panel at Denver Start-Up Week led by Boulder Venture Capitalist Brad Feld, discussing the realities of managing and raising capital for emerging companies.

“Startups Can Be a Struggle”

The panel emphasized that running an emerging or growth company (all, in this case who were venture funded by Feld’s Foundry Group) is not by any means a cakewalk. Some issues the CEOs (all who are successfully growing) report include:

  • Not being able to separate emotion from fact. “You’ll feel a lot of things about (your) company, which you should as the CEO, but feelings are not facts.”
  • Not being able to effectively communicate the ups and downs causes employees to question what is going on in the company.
  • Either not having the focus or ability to learn from empathetic colleagues or mentors. “I’ve never heard anything like I heard in this forum. I wish my 21-year-old self, or my 25- to 29-year-old self, could be in the audience because I think that would’ve helped me a lot.”
  • “It’s always ‘(e)verything is fantastic. We’re crushing it. And then you go home and curl up in a ball at night because you don’t know how you’re going to make payroll unless you get a term sheet in the next month … You’re going to have a near-death experience at some point in your journey, so don’t be afraid of it.’”

100 Start-Up Failures Post Mortems

Similarly, in a September 24th blog posting, Peter Adams, the Managing Director of Rockies Venture Club and author of “Venture Capital for Dummies,” posted “100 Start-Up Failures Post Mortems.”

I would say that reading about the death of 100 different emerging companies is both depressing and overwhelming.

I observed that the failures have common themes:

  • Lack of funding at all stages of growth to ensure that cash flow does not become the issue of the day, every day.
  • The technology was not timed right. In some cases, it launched in a declining economic market. In others, it was way ahead of its time.
  • The company branding/marketing was not communicated to solve a true market need.
  • The company leadership was focused on the current stage of growth, so it could not focus adequately on the future. Accordingly, the technology became stale or was leapfrogged.
  • The company did not have the focus and/or funding to adequately protect the intellectual property.
  • The company vision was not sufficiently or consistently communicated to the relevant stakeholders (clients, investors, and/or employees).
  • The company was never meant to survive in the first place as there was either too little/no market and/or market interest.
  • The company was insufficiently capitalized to take on the industry’s 800-pound gorilla.
  • To raise capital, the company needed rapidly accelerating growth. While the company was able to book a million dollars of revenue, it had little vision on how to scale that million to a billion.

In summary, it is better to learn from someone else’s failures than your own. No one wants to die by one million cuts. Be a member of the Walking Dead, or have your business fail. There is much to learn and plan against.

Contact EmergeCounsel for your free consultation today!


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