Why did I say NO to Funding?
It wasn’t an easy decision! My story is nothing different from other startups built by passionate entrepreneurs. The only difference is that I don’t have a kickass product but a blog (Lighthouse Insights) that focuses on Indian social media exclusively. So when the investors showed faith on my blog, I was overwhelmed. But with every mistake you learn and my life is full of them. Here, I will divide my story into three chapters.
Before the Funding Episode:
This part of my story starts taking shape in the month of December in 2011. I was juggling around my day job with my startup. You can’t hide things for long in social media and before my employer could give me a pink slip, I made the move. However, this was also the time when I had started meeting a lot of people and shared about my blog, armed with just a notepad and no proper networking etiquette and business cards on me. One such visit was to a funding meetup.–
I had gone there to share my idea and get insights on it since I was dead sure that nobody is going to fund a blog with no revenue model. Anyways, the casual meetup turned out to be exciting, as we were few of the lucky startups that where chosen to be funded. Suddenly I was on top of the moon, mainly for two reasons: 1) the money would help survive me and my family plus our savings would be spared! 2) I had found like-minded people who shared my belief. Things were rosy but then they say money surfaces hidden agendas for which this blogger was not at all prepared.
Refusing the Funding:
This part of the story revolves around when we as a team started interacting with our team of angel investors. Love is tested when you start living together. With each passing day, we started getting a feeling that our identity was fading away. At times our blog name was not cool, sometimes we were asked if we could write about tech and then the big question – can’t we double the number of posts per day? Our vision was being modified or in VC terms – being pivoted!
Besides this, in India you are expected to give all things on time but the same should not be expected from the other party. With time, it was also clear that most of our content-related problems went unanswered.
And then came in reality – we were asked to select from a certain range of equity percentage that we were ready to share. I believe that just by reading Paul Graham’s blog, you don’t understand what and why you should give a certain amount of equity. I was also not aware of my startup valuation, forget about deciding what equity percentage to give. But thanks to my brother, a finance guy, who explained to me about our valuation.
Engulfed in a big chakravyu, I had no understanding what to do. At one side, the angels pushed us to sign the deal and on the other, I was finding a way to get out of it all. But at the same time, it was difficult to say no to money and a hopeful future. I started asking people whom I considered as my well-wishers and who had appreciated the work on our blog. This was the best thing to happen. I was asked by most of them- why are you looking for funding? This basic question solved my entire dilemma.
We sat down (my partner and I) to do a simple brainstorming exercise and we realized our mistakes from the very beginning. We had not found out answers for these burning questions:
1. Why do we need money/funding for our survival or startup?
2. What benefit will the money do in terms of resource add-on to our startup?
3. Do the angel investors understand our vision and line of business?
4. What will they bring to the table other than money?
We needed money for our survival and a basic math done earlier indicated that our savings coupled with some consulting work, will suffice. Apart from that, I was soon to be full-time in my startup, so I was excited to test my potential. The decision was made; we refused the funding citing two reasons:
1. We wanted to stretch ourselves and see if we can survive on our own and fuel our dreams.
2. We felt we were getting into a relationship which wouldn’t benefit us in any way apart from the money.
This brainstorming also helped us refuse funding in a second instance too.
After the Refusal:
This part of the story is of present day and I am in the 5th month of my entrepreneurship but trust me I am yet to regret my decision. At times the thought does creep in whether I opted for the right choice but then as they say – You are known for the choices you make in life. Hence, perhaps the dream of running my startup in my way is the right choice for me!
I am not against startups looking for funding or with the investor community. Scenarios are different for everyone and it is an individual’s call. Tomorrow if my startup calls for funds then I would surely hunt for like-minded people who would not only bring money but also share their learning’s and provide us with mentorship. And I learnt a few lessons along the way:
1. Don’t be hesitant to talk to all kinds of people in the industry.
2. You will have to make the first move, as it is your startup.
3. Talk about funding only when your startup needs it.
4. And stand by the decisions that you make in life.
Do share the choices you made in your life as an Entrepreneur. I would love to hear them.
[Guest article contributed by Prasant Naidu, cofounder of LightHouse Insights blog.]