HubSpot recently raised $16M dollars in a new funding round. The total capital they’ve raised to date: $33M. That’s a huge amount of money. Dharmesh Shah, one of HubSpot’s founders isn’t in love with the idea of raising venture capital (but he did it, and explains why too.) He considers himself a bootstrapping guy.
After raising all that money, Dharmesh tweeted:
Startups: Closing a funding round is not value creation. It’s the *opportunity* to create value.
So what’s the deal?
The reality is this:
- Raising capital is extremely hard. So you can’t deny that it’s an achievement, and one that very few startups ever accomplish. And if one of your goals is raising money, you should recognize the success.
- But where startups fall flat on their faces is when they think that getting investment is THE achievement.
It’s not. But it sure is easy to think that way. Someone hands you a big, fat check (sadly they don’t do it with those really big checks that lottery winners get photographed with, although that could be fun!) and tells you to go spend the money.
But as Dharmesh points out, raising money by itself isn’t real value creation. It’s just one of the tools in your startup toolkit that can be useful. And as much as startups say, “We know this is just the beginning…” it’s clear that there’s an obsessive focus on the importance (some say necessity) of raising capital, and once done, an over-indulgent sense of success.
The biggest challenge for any startup isn’t raising money, building a product, acquiring customers, marketing, hiring, etc. It’s focus. Focus is so hard to accomplish for startups – both in terms of what to focus on and how to focus properly. It’s so hard to take a macro-level focus on prioritizing everything that has to be done, and then be able to get into the insane little details as well.
And when everyone obsesses too much about raising capital it enforces a disproportionate amount of focus on the process and need to do so. And that creates a disproportionate sense of success from getting it done (or the opposite if you don’t.)