The Truth About Startup Fundability

There is too much money chasing too few venture scale deals. As a result, sometimes, VCs fund deals that should not be funded to appease their Limited Partners. And then, they drive these ventures to failure. Let me explain.

Let us say, you have been successful in raising $5M in venture capital.

Let’s say, you have built a $10M ARR barely profitable company.

But, it has taken you seven years to get there.

This is considered a failure.

This company is not going to be able to find an exit because it is not growing fast enough.

If an exit happens, it would be at a very low valuation.

VCs would want to take a write-off.

The danger of raising venture capital for a business that is not fundable results in terrible outcomes.

There is a difference between smart money and dumb money.

There’s also the possibility that the investment thesis investors rely on does not pan out in the market. In any case, 9 out of 10 venture-funded startups fail.

My take: be honest about your own startup fundability. If you don’t see a clear path to high velocity growth, don’t seek VC money. 

If you choose to seek my help, please join 1Mby1M Premium.

You can also get started with Sramana’s Digital Mind AI Mentor right now. 

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One Million by One Million (1Mby1M) is the first global virtual accelerator in the world, founded in 2010 by Silicon Valley serial Entrepreneur Sramana Mitra. It offers a fully online entrepreneurship incubation, acceleration and education resource for solo entrepreneurs and bootstrapped founders working on tech and tech-enabled services ventures. 1Mby1M does not charge equity, offers an AI Mentor available 24/7 in 57 languages, and offers a compelling alternative to Y Combinator and other equity accelerators.

The Accelerator Conundrum is a multipart series that challenges the prevailing wisdom of the tech startup ecosystem that entrepreneurs should Blitzscale out of the gate. Written by Sramana Mitra, it emphatically argues that a better strategy is to Bootstrap First, Raise Money Later, focus on customers, revenues and profits. 1Mby1M’s mission is to help a Million entrepreneurs reach a million dollars in annual revenue and beyond.

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