Startup or Company by Szymon Janiak

The post was originally published in Polish on Szymon’s LinkedIn profile. Szymon kindly agreed to republish what we think is of great value to our readers.

Startups raise money, companies make them. The sooner a startup understands that it is a company, the better.

The conclusion came to me recently after working with my portfolio companies and consulting dozens of independent startups. Many of the conversations were devoted to raising capital. What should we do now? Who to go to for money? What should I change in my deck? There was a certain automatism embedded in it: I have a start-up, I’m going for a VC round. The first, the second, the third, – it doesn’t matter anymore. What they had in common was that founders literally spent most of their time chasing investors. And because it is long, uncertain, and exhausting, sales drop critically. What’s more, when I get to ask why they actually need this money, the answers are quite schematic: development, functioning, the product. Hardly anyone has a precisely worked out plan on how to turn this capital into faster growth for the company. As a result, it is treated as the oxygen necessary for functioning, and not as nitro fuel to boost the booming development.

Founders who put sales first rarely change their priorities. First of all, they know that if they do really well, there will be investors sooner or later. Such companies don’t need them to survive and as a result, the management board always thinks several times whether such a move really makes sense. Personally, I have a lot of respect for founders who at some stage consciously deviate from the VC path. It takes a certain amount of maturity. They realize that they will no longer be a mythical unicorn, but they are able to build a thriving and profitable company. This is their development path for the coming years. They may be able to sell the company in the future, but even if they don’t, the profits it generates will allow them a quite decent living. Paradoxically, many are better off like this than in symbiosis with VC funds.

I remember when I was taking my first steps in VC years ago, a founder told me: “I’m sorry Szymon, but we have to cancel our meeting. I have a super important meeting with a client that could make a big difference for the company.” At first, I took it as a simple disrespect. Maybe even as some kind of playing hard to get. It took me some time to understand that this was the only right attitude. Customers should be at the top of the hierarchy. We, the investors, should be secondary to them. A company with customers will always be able to cope. The company with the investors themselves is a bit worse. Instead of constantly trying to raise money, it’s better to just make money.

The comment section had to add:

When someone asks me what is the difference between a startup and a normal business, I always answer like this: a normal business sells its idea to customers, a startup sells it to investors.

– Ewa Bartnik, VP & CFO at Imker_pl

In IT, it’s difficult to create something bigger without funding. Part-time work doesn’t help, too, and then it even happens that the code is created slower than it ages.

– Michał Łaszczewski, Chairman of the Board at the Institute for Strategic Readiness

Isn’t it the VC market that has created this way of conduct for startups and in fact pushes founders in this direction? After all, if the project doesn’t collect another round, its valuation doesn’t grow, and therefore, the chance for a unicorn, a spectacular exit (and profit for the VC) decreases. I understand that your approach is a bit different, but most of them expect such round-chasing, don’t they?

Ever since I was brought to the realization that as a founder, I would mainly be dealing with collecting rounds, I was grateful for showing me this path. Where’s the fun in that.

– Paweł Bylina, CEO and CTO of BugBug.io

It kind of depends on the start-up, I would say. Because a SaaS startup is one thing and a medical start-up that requires years of R&D before it enters the market is another. There, of course, the question arises whether other sources of funding are not better.

– Dr Jan Kwapisz, Senior IT Manager at Procter & Gamble

This should be hammered into people’s heads at various conferences and trainings for startups. It’s kind of obvious that when you have a company, it exists to provide some value to customers, and you make money on it. But it probably happened because of the VCs themselves, the media and conferences, that people ‘learned’ that having a startup elevantes you above this mundane selling. A financial round, deck, pitch, etc. sounds much better than a sale or a simple meeting with a client.

– Piotr Kądzielski-Zysk, Founder and President at Training Effect