I don’t believe in the concept of “graduating” from an accelerator, but since most incubators and accelerators use this as a framework, let’s discuss what entrepreneurs ought to do when they ‘graduate’ without funding.
This, btw, is the plight of MOST startups around the world.
MOST incubators and accelerators promise to get them funded.
MOST fail to keep their promise.
Because most businesses are not fundable.
Let’s recap some basics from Entrepreneurship Does NOT Equal Financing:
I am terribly irritated by the pervasive and continuously fanned misperception that Entrepreneurship equals Financing.
Entrepreneurship = Customers + Revenues + Profits.
Financing is optional.
Exit is optional.
The media is reinforcing the myth. Business schools are reinforcing the myth. And hence, they’re setting up entrepreneurs for failure.
A business can only become big if it can first get off the ground. The problem with perpetuating the myth is that most entrepreneurs try to raise money immediately and mostly bump around against solid walls.
Today’s reality? Investors fund businesses that have already taken off, not a slide deck or a business plan.
Most businesses are just too small for venture capital. Unless you are working on an opportunity that has a billion-dollar total available market (TAM), VCs aren’t interested in your business.
There are, however, many more $5 million, $10 million, $20 million, $50 million business ideas out there. Those are perfectly worth building.
What is wrong with building a $30 million annual revenue business that throws out 30 percent profit every year?
Or a $3 million one, for that matter?
Most businesses simply do not grow at an exponential pace. Most businesses have linear growth curves, not hockey stick growth curves. There is nothing wrong with a $10 million business that grows at 20 percent year-over-year. VCs won’t fund these businesses, but you can bootstrap one with revenues and profits, and that is entrepreneurial success, as far as I am concerned.
Over 99 percent of the businesses out there are not venture fundable because they are either too early, too small, or too slow.
That doesn’t mean they are not viable businesses, and that you cannot be a successful entrepreneur by building one.
So, if your incubator or accelerator has already ‘graduated’ you, and you haven’t received financing, chances are, you are wondering what is your next step (the probability of this scenario is over 99%), please consider the above, and focus on validating your business, look for customers, revenues, and profits.
If you need help with your business strategy, come talk to me at a free 1M/1M roundtable.
Photo: Thierry Gregorius/Flickr.