Creativity is a great thing – when it’s needed. And that’s the problem, sometimes we only get creative when we have to. And that’s often too late.
Take the example of raising investment funding for early-stage start-up companies. You start out in good times with a ground-breaking product idea that is going to change the world. You evanglise it, and hey presto – you’ve attracted a bunch of investors. The valuation is high, but the investors doesn’t seem to mind – after all, it’s good times and you’re onto a good thing.
But then, the world changes. Now you’re at the bottom of the economic curve and times have gotten tough. Guess what? New investors are laughing you off at the sheer audacity of your valuation proposal. Remember Murphy’s Law – the other queue is always shorter. There’s always another company who is MUCH further along than you are – AND has a better valuation. “Thanks, but no thanks. Next”.
So you cut a deal to stay alive – and the valuation is a fraction of your previous round – then you’re busy trying to keep your current investors happy….”hey, why didn’t I get the same deal?” There’s no way back. Now you’re in a recession, and investment funds have dried up and your cash burn rate has gone through the roof! Goodbye party time. Hello fight or flight.
OK, so you’re an entrepreneur, and all entrepreneurs fight, right? So, big nasty sabre-tooth tiger is at the entrance of your cave and your defensive instincts are kicking in. Nothing like a bit of adrenaline to keep you on your feet. The creative juices start flowing – and fast…with traditional sources of finance out of the window, you’re looking at innovative new ways to raise finance – crowdfunding, partnering with your clients, etc, etc. Ah, so you’re in bootstrapping mode all of a sudden huh? Hold on Mr. entrepreneur wise guy – you gave equity for a ridiculous valuation in the beginning and raised all this money that you probably didn’t even need. Dream On* Isn’t it a little late to start being creative?
The traditional venture capital model for early stage companies is dying – fast. Use this as an opportunity. Build half a product, with a few simple bells and whistles, then go get revenue. Stop spending time and investors’ money over-engineering a product that customers might not need. Forcing yourself to be creative in the beginning will bring 3 advantages: (i) it really WILL be your own company, (ii) you’ll spend less time chasing money and more time creating value, less time planning and justifying to investors and more time selling, and (iii) bootstrapping in this way will help you manage your finances a whole lot better.