Having just completed my spring business plan season — three big business plan contests and our angel group investment — I think it’s a good time to poke some holes in several damaging and far-too-common myths about startups.
Furthermore, as I write this I’m just leaving Disney World, so the myth of the Pied Piper (the illustration here, in case you were wondering) comes to mind too.
1. Be your own boss
Forget it. That’s a myth. Sorry, but if you’re looking for freedom and independence choose wealthy parents, win a lottery, or learn to live on no money at all, and have no relationships you care about. If you’re going to build a business, you’re going to have lots of bosses. In the best businesses, every customer is a boss. And then there are the people you owe money to, the people who owe you money, strategic allies, and your own employees. All of them can be bosses at times.
And if you have investors, you have bosses. One thing they buy with their money is their voice.
2. Finding investors is a win
That’s what we teach in business schools and classic entrepreneurship: you develop a business plan, you get financed, and then you start. And often it is a win, and it is good. But it ain’t necessarily so.
It’s a conditional win. It’s only a win if 1.) you need the investors and you can use the money to grow your business; and 2.) you find compatible investors you can work with. If you don’t have both those conditions met, then winning investment can be a big loss.
Getting investment from the wrong investors can be like a bad marriage. It can spoil your business and your life.
If you can build your company without investment, there are some important advantages, like in that case you own it all yourself. Nobody is looking over your shoulder, or at least nobody with as much power as investors. Owning it yourself is a good thing, if you can make it.
Of course it depends on the opportunity. There are some businesses that need investment badly, and would not make it without it. And there are some that have a choice. They may grow slower on their own, but they can make it.
3. More money is better
It’s out of date now, but if you look for it, you can find the 1997 Dun & Bradstreet research on causes of business failure that listed “too much money” as one of the causes. It seems silly, of course, but they were serious. There’s a lot to be said for spending money wisely, and filtering spending opportunities according to the related business benefits.
I think there’s a startup sweet spot, for most startups, in which the resources available match the opportunity. Money is spent the right way, building the business, but without overspending.
And my own company, Palo Alto Software, might not have survived the dot-com crash in 2001 if we’d had more money to spend in 1999. We didn’t have enough monetary rope to hang ourselves with. That was a good lesson.
(Image: J. Norman Reid/Shutterstock)