This is a topic near and dear to my heart. And one I happen to have some pretty strong opinions on.
Yet before I dive into what I think will finally solve startup funding (and disrupt a legacy VC industry that could use some refinement), allow me to share an opinion with fellow entrepreneurs, founders, and seasoned startup salts who may be dubious in reading this.
The Dilemma
I just posted about this the other day on LinkedIn, but founders face a constant dilemma: bootstrap or capital.
I like to call this the Growth Debate.
While I’m already being hit up with DMs on LinkedIn about my post, there’s only one foundational factor determining an answer to this debate, which tends to cancel out just about every other opinion: time.
Or should I better state it as time(ing).
I believe time(ing) underlies everything important in growing a startup.
If you want to take the long growth path over time, then never take a dime of capital; grow your business from your own revenues, keep 100% of your equity, and run your own show.
If you want to blow up your business in a lot less time, then connect with big strategic partners, give up some ownership, be willing to share on some big decisions, and likely achieve liquidity a lot faster by capitalizing your growth.
Taking either path depends entirely on your time considerations and how fast or soon you are willing to reach your objectives.
There is not much gray here in between.
You either BOOTSTRAP your growth or CAPITALIZE your growth.
On one hand, some founders have the patience of a Jedi and will hold out for a very long time, are happy to grow organically, and, over 15, 20, or 25 years, foster a superior business that can be either turned over to a son or daughter or eventually sold to a larger or strategic competitor. The ones who actually succeed at that are legends.
On the other hand, some founders have incredible visions of changing the world a lot faster, will bootstrap the product out the door, show initial revenues, and with the help of a few Angels, spike the business, roadshow for Series A, and off they go to the races for 10X, 20X or even 100X growth in 3–5 years, reaching an IPO or sale in maybe ten years
But all in all, it depends on one, and only one cornerstone: time(ing).
The X-factor
Time(ing) is really the X-factor for start-ups, in my opinion.
Why is time(ing) soooo important for a startup?
Ahhh, yes, how I love thee… let me count the ways:
Competition: a well-timed launch for your startup means maybe swooping up a nice bite of market share before your competition does.
Resources: getting key resources you’re after, e.g., maybe snagging up some quality peeps from Big Tech or other layoffs that were actually producing and just lost out (or just outright poaching with a better $opportunity$).
Exposure: getting some killer media coverage and industry buzz based on what’s happening in the world could translate to a swarm of adoption or exposure, which could make or break your business or product being the “next big thing.”
Seasons: this could be critical for your product if it’s seasonal or trends based on demand. Are you a holiday-driven product or business?
Investors: this could mean hitting the exact right timing to get in front of critical investors who may be cyclic on placements, or just certain times of the year they write checks, or maybe being in the right place, at the right time, landing that meeting that opens the right doors.
Revenues: you could be in a bad spot on your own revenues and balance sheet looking not so attractive, so maybe you need more time to build up better cash flow.
Valuation: this is a pivotal metric for raising capital and what your offering will look like. Chasing capital during a nice run of growth looks much better to justify a higher valuation than showing a flat graph when pitching for your round.
Landscape: general economic and geopolitical conditions can affect when you launch or when you’re roadshowing for capital.
Partnerships: big institutions, big companies, or larger enterprises looking to acquire startups or form partnerships most likely have timing windows when looking for deals.
Legal: not the biggest consideration, but maybe for yours. Timing may have a lot to do with legislation, maybe just issues affecting your startup (good or bad) opening or closing pathways for your business.
Do you see how time(ing) is so critical? IT REALLY IS.
Deciding What to Do
Entrepreneurship is easy, said no one ever.
I know. I’ve been living as a serial entrepreneur for many years now and have walked this walk. And crawled it. And hobbled it while injured. And sprinted to victory on it. Either with numerous of my own startups or helping others with theirs, either bootstrapping with my partners or myself roadshowing and raising millions in capital.
However, as a Founder, you must first make a very clear decision about what you want to do.
a) If you have firmly decided you will never raise a dime and want to make it entirely on your own as a startup, then you have the confidence of Hercules, and I bow to thee.
b) If you’ve decided you want to raise capital to blow your business up, I’ve got a solution for you.
But either way, you must first bootstrap getting your business started, as all you have to start with is YOU.
If you’re an entrepreneur at any stage and are reading this, then you are likely to fall into one of these three categories:
IDEATION. You’re at the stage of having a “great idea” but have no idea or plan of how to launch or turn it into a start-up. Hey, all good. I’ve got your back. Just click here to check out my 10 Steps Start-Up School, and I’ll help you figure things out. Starting a startup is a science. Not a game of chance in Vegas. My program will help get you figured out and started, and you can move things forward from there.
PRE-REVENUE. Your startup has launched, but you’re pre-revenue. If you’re this far, then you rock. But, you have got to eat the (revenue) frog. By this (and this is my own take here), I mean confront bootstrapping it all the way with friends, family, or wherever you can gain confidence, trust, money, and the bare minimum resources you need to iterate a first product (or service) to market, get validated, and start generating some revenues. You have no choice but to do this for a number of reasons. From proving to yourself, there is an actual demand or value to your idea or product to demonstrating a reasonable stretch of uptrending revenues to obtain serious investment later. Either way, you have got to eat the (revenue) frog.
POST-REVENUE. You’re already into revenues but now need serious capital to blow things up. If you’ve made it this far, then congratulations. You truly have become a rock star. Now, it is the time to learn the secrets of Wall St in the world of Venture Capital, get serious about running with the Big Dogs, and learn what it will take to get VCs lined up wanting to write checks to fund your growth.
Raising Capital: Being the Prettiest Girl at the Dance
Ahh, yes, this is where all the magic happens.
This is where the dreamers meet the doers.
This is where we separate the wheat from the chaff.
Going from where you are right now as a startup founder to becoming what’s designated as “quality deal flow” for a VC is where all the magic happens.
But nowadays, what actually is a “quality deal” for a VC?
For many years, up until (and a bit into) COVID, the VC pattern has largely relied on these “scientific factors” of “due diligence” to select startups: founders as great storytellers & are they highly-convincing, pumping up mass-market disruption, convincing pitch decks, showing incredible adoption, and presenting hockey stick forecasts.
As facetious as this may seem, it bears much more truth than admitted.
On the premise (and promise) of all or nothing, while factoring in the “ugly truth” of a 9 in 10 startup failure rate, deal selection by investors in the last decade or more has become a “Startup Fashion Show”.
Posing down the runway, startups have become a “numbers game” for VCs, with them in the audience as judges reviewing a high volume of startups to determine which can uniquely fit the aforementioned “criteria”. Finally, select and buy into just enough by a metric portfolio ratio that will ensure to land that one or two home runs that will eventually offset all the rest who don’t make it as losses and collateral damage.
Fortunately, those days are nearly gone.
In fact, if not already gone, they are certainly going away quickly.
VCs can no longer justify the loss of billions upon billions in flamed-out cash for startups that have returned $0 portfolio value to their trusting LPs.
What are the criteria now, or at least what has changed and instead moved to the head of that line in this startup “fashion show”?
Meet the new Boss: BALANCE SHEETS
That’s right. Those dull, boring, blah blah balance sheets that 99% of founders have no real idea how to manage effectively.
Much less financially model their startup to master or dominate.
But wait, aren’t those for Accountants? Or CFOs? Or My Cousin Vinny?
Not anymore. And guess what? Your investors now want to see how well you are mastering them.
And more.
In fact, those investors who want to write your checks now want to see clearly,, summarily, and upfront:
Complete & accurate financial modeling.
Complete & accurate financial reporting.
Complete & accurate forecasting BASED ON THE ABOVE.
Not fabricated hockey stick graphs showing “to the moon!” revenues or adoption. Or numbers that make no real sense and as an afterthought following 20 slides of killer product, marketing, sales, and promotional planning.
Your startup is either ON A TRAJECTORY TO WIN BASED ON EXISTING NUMBERS, or it is not.
You either have a solid, accurate, and strong BALANCE SHEET, or you do not.
You are either CORPORATE ENGINEERED to grow, scale, comply, and win, or you are not.
Now, if in addition to these foundational critical factors, you also have a mind-bending product, a massive market, and a trustworthy team…. and you can show how an infusion of their capital will 10X, 20X, or even 100X your growth, then YOU WILL GET FUNDED.
Let’s call this right now a new era of “balance sheet investing”. Frankly, this is how it used to be in the 60s, ’70s, and 80s.
This now leads us to the next question.
How Do You Get There?
By having a real business that investors have no hesitation risking their money in.
By soundly structuring your business to produce, sell, deliver and service, and make profits with a deal so attractive that investors cannot resist giving you money.
Truth: it is 100% possible to raise all the capital your startup will ever need while retaining the vast majority of your founder’s equity and decisional controls of your business.
Here’s an unpromoted secret on Wall St: VCs and Investment Banks don’t want your product, your business, your IP, your customers, your market share, your brand, your reputation, your company, your influence, or even you.
They want one, and one thing only more than anything else: your money.
Namely, they want the potential masses of cash your company will return to them for investing, resulting from (a) an IPO, (b) a private sale, or (c) ridiculously high cash flow feeding them dividends.
Frankly, there are no in-betweens. There are no compromises. And since COVID and as we have entered the unstable economics of 2023, I can assure you there are no material exceptions.
But here’s the trick: how do you make your startup “quality deal flow”?
If a founder needs capital right now, should one not just crowdfund? Throw a power-pitch-deck together? Start road showing to investors asking for money?
Not really. Polishing up a sports car that needs some engine work won’t make it run better.
Becoming “quality deal flow” to get funded is actually a science. And I say this with absolute confidence: MAKING YOUR STARTUP INVESTABLE AND RAISING CAPITAL FOR IT IS AN EXACT SCIENCE. WHEN LEARNED, APPLIED, AND USED, IT WORKS. 100% OF THE TIME.
The problem is, until now, this science has never been codified, published, and put into a “turn-key program”, much less with a guarantee that it will work.
Well, that’s now changing.
A New Era of Startups
Welcome to the EPEC Platform™.
While I would love to take credit for this program, I’ll say instead that I am more humbled and honored to have the opportunity to be a part of now running it.
My gawd, how I wish this had been around 20 years ago.
Having a program that any serious entrepreneur can do that essentially results in investors handing you checks by the end of it would be considered hallucinatory, or at best, a Startup Disney movie.
But this is not a dream. And certainly not a fantasy–this is the real thing.
Rather than me elaborating on the program poorly, please feel free to visit the page yourself and take a few moments to read about it.
If you’re truly a serious entrepreneur (or a family office, PE, or VC and could use a hand getting quality deal flow), then speak to someone from our team.
The EPEC Platform™ is for real.
I believe it will arguably become the most pivotal program in this decade that can measurably improve the 1 in 10 startup success rate to 2, 3, 4 or even 5 in 10.
This is not a small-minded program.
The book, information, depth of market knowledge, and subsequent conservatory period for startups is game-changing.
The program works. And the use cases, founders, and testimonials boast about it on our corporate page, as you can see here.
I hope this article has been of value, and I hope, as an entrepreneur, you can put some of this to good use.
Feel free to email jbennick@commonwealthcapital.com.
I’m here to help my fellow founders and entrepreneurs succeed.
This is my core motivation. And I get the greatest pleasure in seeing others win in their own efforts to achieve their dreams.
I can’t wait to help you achieve yours.