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Be Grateful You’re A Bootstrap Entrepreneur

on June 07, 2010 Source: Policy Dialogue on Entrepreneurship

Tech Crunch guest writer Vivek Wadwha wrote recently in "Startups: Poverty is Underrated. Be Glad That You’re Not Rich" that money is often a curse for entrepreneurs. “When a company is running on a tight budget, it will usually perform far better than a company that is well capitalized.” Wadwha shares his observations over the past years of bad habits fostered by having too much money:

1.    The CEO will feel pressure to upgrade the management team. Seasoned managers, he explains, want bigger salaries and larger chunks of equity. This “can serve to disrupt what must be the core focus of any startup—pulling in revenues as quickly as possible to forestall death.”
2.    Outside financing can bring expectations of very rapid growth and thereby de-emphasize profitability.
3.    Outside money means more time thinking about keeping the board of directors happy rather than the customers.

While the author is far from making a statement that rockstar management teams, boards, and VCs are bad, he makes one point clear: money by itself won’t make you successful; it may well cause you to fail. In fact, capital starvation leads to innovation.

Read more, here.

Category:  General 

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