As CEO, Are You Investor-driven or Sales-driven?
If you’re running a startup, then you must know if you’re a sales-driven CEO or an investor-driven CEO, and if you’re in-between, how in-between are you…
Unfortunately, starting a startup has become a fad nowadays. Driven by all the #BYOB hashtags on social media, everyone with a half-baked idea wants to run a startup, so they register a company, edit their Instagram account to CEO and get started.
Maybe they talk to potential clients about their idea, or develop a product and send it out to the market, receiving a paycheck or two in the process.
All of that is well and good.
Until they take a detour and start spending a majority of their time chasing any event where there’s the tiniest glimmer of hope that they could get funding. They start working on activities to serve their dream of bagging huge funding that will help bring in the beanbags and billiards table through the door.
If the startup is built around a tech product, that means doing anything to increase the number of downloads and registered users to sell the story of exponential growth. It also means putting together a cool catchy website and high definition videos and posts on Facebook and Twitter to tell the story of how they’re changing the narrative in Africa and making the world a better place.
It’s supposed to work on a positive-feedback mechanism: The more the startup gets enough people to talk about how big they are, the bigger they become by attracting more business.
The problem is, the process of building a business does not work this way.
But that’s like putting the carriage in front of the horse.
Then unharnessing the horse and letting them run away.
At the end of the day what matters more than the number of subscribed or registered users on your product are the number of engaged users and churned users (the former tells you what you’re doing right, while the latter gives you an opportunity to discover what you’re doing wrong). Also, what matters more than cool websites is the actual work that is being done behind the website and how all of those metrics [user engagement/field work] translate to an increase in revenue.
We’ve mentioned in several posts (Link 1, Link 2, Link 3) that it has become the norm for founders to focus on investor-chasing activities. But that’s a bad strategy not only because it diffuses the founder’s focus but because it wastes a lot of the company’s money since a lot of investor in-person meetings happen on different countries/continents thus requiring flight tickets and accommodation.
Money the startup already doesn’t have enough of.
The alternate for you as a founder is to spend 80 % of your time with paying clients. Not just talking to them about how awesome your idea is, but actually proving that awesomeness by closing sales, signing contracts, delivering work and getting paid.
Given, it’s a slower process than trying to sell the idea of the company directly to investors, which is why many young founders drag their feet there. They erroneously think, “Let’s focus on getting the funding first, and then we’ll start to close deals later.”
First of all, it is true that actually being in the market trying to sell to clients one by one is no fun. It requires training your mind to face rejection with a positive attitude. It also means you wouldn’t be backing your Instagram’s CEO title with the right image — the fancy suit and offices. Instead, you would need to keep your burn low, and maybe live with your entire extended family for a while, listening to their barrage about how you need to get a real job like your cousin, Tim.
But being in the market selling is very important because it validates your idea by bringing in revenues. And the lack of revenues would signal that maybe you would need to rethink your product or service, which most founders are reluctant to do because it tends to tie up to their ego.
Also, the phrase, “Necessity is the mother of innovation,” exists for a reason. Having less resources sometimes pushes you to innovate in order to keep your burn rate low.
Setting up your entire survival strategy on fundraising can be likened to playing slots at a casino. It’s a short-term strategy that could work or not. The slower more certain strategy is to acquire clients, and deliver to them directly, then having them pay you for the product or service.
There is no denying that having enough financial capital is important for a business to survive — and it has been the nail on the coffins of far-too-many startups, especially in Africa, so I’m not saying to never seek funding. What I’m advising against is seeking it as a first option rather than a last option after self (or family)-funding or bootstrapping.
As much as there are millions of books on how to be an entrepreneur and run your own business, you can’t really learn the how until you do something, because there are millions of tiny nuances to selling and entrepreneurship that require continuous human interaction.
In the next post we will delve deeper into the topic of seeking investments if you’ve grown your business to the point where you absolutely need external funding following conversations with Tania Ngima, CEO of Demo Ventures, and Jason Musyoka from ViKtoria Ventures.