Just because you are VC funded does not mean you have unlimited funds
I was at an event recently when I heard the following during a presentation:
“we are VC funded so don’t have to worry much about hosting costs…”
Having worked for about 6 startups over the last 10 years (none of them VC funded incidentally), this was probably the most arresting thing I have heard all year.
To be fair, it was not the CEO of the company talking, but what was perhaps more worrying was that the Gen Y chap presenting probably believed this from something that has been said at a more senior level.
It reminded me of back in the late 90s and early 2000 when dotcom valuations were sky-high and Wired, Business 2.0, Fast Company and Red Herring (remember the last 3?) regularly published 200+ page editions filled with the promise of blue sky investments.
Having worked in the start-up space for so long, I know first-hand what can happen when you don’t have your costs controlled, or have inexperienced management who are making mistakes for the first time with a large amount of funding in the bank.
I was involved in an Australian start-up a few years ago (personally invested my own money also), and saw a company with a bright future, some smart technology with a $MM investment struggle, the result being the company was wound up and the IP sold for a song.
So when I hear “we’re VC funded so we don’t have to worry about costs”, I immediately sense a company that is not in control of their own destiny and reliant on other people for success (or the hope of it).
My strong advice as a multi-startup veteran is if you are Gen Y and are in a start-up, treat the money invested by the VCs or Angels to get you started as if it was your own money invested and spend it wisely.