Startups Don’t Need Money
Updated: Dec 5, 2020
Think of that historical moment of 1600’s venture capital when Columbus went before Queen Isabella and King Ferdinand of Spain and asked them to finance a voyage into the unknown. We don’t know what he said, but we do know the details of the resulting contract. The monarchs agreed to contribute “some of our ships and subjects" in order to "discover and acquire certain islands and mainland,” plus 90% receive of any profit. Columbus, on the other hand, received the right to be Governor General of any lands he discovered, and 10% of the profit of any trade he brought back.
Columbus was an entrepreneur of his era. While technologies have radically evolved since his day, the core principles of entrepreneurship are surprisingly similar. He saw an opportunity that was risky to take but had the potential to be very profitable, so he pitched an investor, got the resources he needed, and set out into the unknown. However, it wasn’t money that Columbus received, it was a fleet of equipped ships and sailors.
Today, just as then, an entrepreneur has no business asking for money until they understand where they’re sailing, and what ships they need. In modern terms, the goal an entrepreneur is setting sail for is a profitable business, and their ships are the resources needed to get to that point of profitability (e.g. marketing, tech development, patents, ad spend, staff). Money is what we generally use to buy all these things, but it should never be confused with them. Asking for money without a detailed plan of what it’s for is a mistake that we see many entrepreneurs making. Doing so sets a company up for failure.
To jump to another era of entrepreneurship, the Wright Brothers beat out far better financed aviators. They won because they had to be lean and focus on what mattered most, which was truly understanding the equations of lift. As a result, they were the ones who figured out what it takes to fly.
For entrepreneurs then and now, it’s essential to have a clear understanding of what you really need, and it’s not money.
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