Unicorn Tears

CHAPTER 5CASH IS KING

Cash is king when it comes to startups. It is the oxygen that keeps your business alive. When founders think about cash, they typically focus on fundraising, which is important, but not the most important financial aspect that founders should consider. Of the 10 main reasons why startups fail, three can be attributed to funding-related issues:

• running out of cash
• being overfunded
• investor disharmony.

It might surprise you to know that startups can be both overfunded and underfunded, which is entirely at odds with what most people believe. Most entrepreneurs will recognise the problem of being underfunded. Many are less aware of the risks of being overfunded. Both problems can sink a business. Here I’ll explain just how each of these funding situations can lead to failure and how the investment-ready founder can prepare for them. Finally, the relationship you have with your investors is also extremely important. If you don’t get this right, then investors can make your life as a startup founder a living hell.

Myth: Fundraising equals success

In their early stages, most startups live from one funding round to the next. Founders are often fixated by capital raising. It’s understandable, since without capital most startups wouldn’t survive. However, because they live in a capital-starved environment, when they do get funded many startups think they have made it to the finish line. In fact, fundraising is just the beginning. Having the right mindset is ...