One irritating consequence of my traveling the country while singing the praises of the science behind the Money Machine concept is the disdain that often arises in the hearts and minds of certain segments of the financial world, yep you guessed right – INVESTORS. In this instance I use the term investor as a descriptor very broadly to include
- venture types
- self-funding zealots
or anyone who offers any form of debt relief or equity dollars or a self-funding financial “kick-start” to a tech, foodie, maker, or creative business start-up.
Now I already know that many of you reading this post have just finished perusing the most recent issues of Inc, Fast Company and Wired magazines and are thinking, “About what in the heck is this entrepreneurial fruitcake postulating?” I am so glad that you asked.
I recently attended a local networking event where a few angel types were engaging a group of very sharp start-up founders. As one of the angels was introducing me to the group he stated something to the effect “…he and I have very different views on funding start-ups. He”, referring to me, “believes that founders should bootstrap their businesses and grow them organically, while I”, the angel referring to himself, “believe that start-ups should have all of the capital necessary to scale as quickly as they possibly can.” I still shake my head from side-to-side when I think about his most inaccurate explanation of some of the coolest business science on the planet.
What I often seek to understand is why would anyone with a sane mind invest in a business enterprise of any type that has no customers and after doing so be perplexed as to why they did not receive a return on their investment? Quite a perplexing question indeed. Here is a modern day riddle for you the reader – “Guess what happens to any type of up front funding that is given to an individual or group of start-up founder(s)?” That’s right – She or he or they find very innovative ways to spend it!
- Maybe it is that batch of new $4,300.00 27″ iMacs all tricked out w/ Retina 5K displays, 4.0GHz quad core i7 processors, 1TB of flash storage, and 32GB of SDRAM, without which the firm’s software developers, designers, and ceo could not write a single line of code nor manage any of the business operations.
- No I’m sorry and am mistaken, its that $1200 Bivi table for two, a couple of those $900 Gesture chairs and that $2000 Bivi counch, by the way, all superly cool and designed by SteelCase/Turnstone, without which the two co-founders of a particular start-up could never accomplish any work nor hold their first set of business meetings.
Am I exaggerating? Not by much. This scenario or one similar plays out in the start-up world each and every day and these are only a few of the front end entrapments.
When I think about the back end gotchas, an American History instructor that I once had always comes to mind. For two consecutive semesters he began each day’s lecture with the following statement – “Nothing in this world is free!” Many years removed from that particular history class I can only echo his sentiments – Nothing, and I do mean nothing, especially investment funding of any type, is free. Please don’t get me wrong. I have no issue with investment capital in all of its shapes, types and sizes. I just personally believe that it is one of the worst ingredients for a start-up Money Machine and its founder(s). The true cost of this infamous type of funding is a matter of to whom the Money Machine founders become beholden once funding is accepted. For instance
- typical debt funding – founder(s) beholden to the banks or family members
- equity funding – founder(s) beholden to the angel/venture capitalist or family members
- self funding – founder(s) beholden to spouse, children, or did I mention family members?
Each of these scenarios create unnecessary entrepreneurial noise and in each of these instances the founder(s) are beholden to everyone but the individuals to whom they should be superly acknowledging and paying attention – the CUSTOMER (more on this concept in a future post). For the Money Machine founder, outside of themselves, this is the only group of individuals whose opinions really matter. Why is this the case? Simply stated
NO Money from Customers = NO Money Machine
But you the reader may be saying
- “I want to create a company that scales to the point that it dominates my particular industry! What other options do I have?”
- “What about that savvy and successful banker or angel/venture type who has a penchant for providing “seed” investment funding to start-ups who possess zero customers?”
Ok, ok, I hear you loudly and clearly. How about we chop up the details of these inquiries and some possible solutions during our next segment. Until next time…