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'Fundraising Rounds Are Not Milestones' (ycombinator.com)
Michael Seibel, a partner at Y Combinator, writes in a blog post: I'd like to make the point that success isn't the same as raising a round of financing. Quite the opposite: raising a round should be a byproduct of success. Using fundraising itself as a benchmark is dangerous for the entire community because it encourages a culture of optimizing for short term showmanship instead of making something people want and creating lasting value. I believe founders, investors, and the tech press should fundamentally change how they think about fundraising. By deemphasizing investment rounds we would have more opportunity to celebrate companies who develop measurable milestones of value creation, focus on serving a customer with a real need, and generate sustainable businesses with good margins.
I remember a conversation with our Columbia MBA founder stating our success was evident in our expanded workforce. No mention we had zero sales--zilch. I miss the good ole days :D
I've always said English was my second language. Had Romeo and Juliet been written in C, I might have understood it.
In all the years I was running companies, I always felt like the need to beg for outside money wasn't necessarily a positive indicator. ;) I grew my businesses organically, reinvesting profit.
All of my several companies stayed small. Profitable, but in a very small way. I now see, probably too late, the value of *growth*. If you want to be successful in a big way, it's perfectly okay to focus on getting big first, if you have a solid plan for profitability. A major funding round is a landmark of getting bigger, which is an essential part of big success.
Specifically, in new markets - a new product category, a new geographical market, etc, the correct course is to quickly establish market share, borrowing as necessary, then shift to a sustainable, profitable strategy as the market matures. An example would be smartphones ten years ago vs today. Ten years ago, it would have been a good idea to spend (lose) a hundred million dollars in the course of becoming a significant player in the brand new smartphone market. A few years later (2012-today), you'd shift to making money from your strong position in the market.
Obviously getting confused and investing heavily to become a player in a shrinking market would be dumb. If a company is losing money in order to enter the desktop PC market, that's probably a mistake. But if they are "losing money" developing a practical quantum computer, that may be very good and a new round of funding that allows them to grow and do more R&D is good news. Tesla is a good example - they are losing tons of money, but for the purpose of becoming the dominant company in an expanding market, electric cars.
"deemphasizing investment rounds"
"making something people want"
"creating lasting value"
"sustainable businesses"
Sounds like Communism to me.