Entrepreneurs and the Habitual Funding Cycle

fundingI’ve been working with entrepreneurs through Endeavor for a little over five years now; and I have noticed a definite trend with a number of entrepreneurs. There seems to be a default level of comfort that a number of new entrepreneurs and definitely serial entrepreneurs seem to fall back on.

Funding is an important part of any entrepreneurs journey. Funding acts as an external verification that the business model; business concept and operations are at least sound – if not optimised. It is validation that the entrepreneur is doing well and that things are on the right track. (assuming of course that the entrepreneur actually gets the funding).

But that’s where I see a 2x problems creep in.

Support; support; support

Entrepreneurs are notoriously bad at asking for help and then following through with the advice given. (yes; this is a generalisation). Couple to that the fact that many venture capitalists and angel investors don’t follow-up and support the entrepreneur once they have given funding.

Entrepreneurs are generally left to their own devices and are only expected to atone for their expenses and investment decisions once the money has been spent and the investor is questioning where the return on their investment is.

They are not given support on where and how to spend the money that has been “given” to them; particularly if the investment was not for an equity stake in the business. This leaves the entrepreneur to their own devices assuming that their course of action is the right one.

More funding = More validation

As the money begins to run out – more often than not because it was not used to scale the business adequately – the entrepreneur is forced to go and get more funding. Funding is granted. And the cycle gets repeated.

This habitual need for funding needs to be broken with ensuring that entrepreneurs are supported and guided in their strategic decisions. Only then will their businesses grow to a point where they are not needing funding to sustain themselves; but rather they are using the funding for strategic acquisitions and expansions!

My concern is that if we are never breaking this funding pattern; we are only building a contingent of small and medium impact entrepreneurs who are churning through funding at a rapid rate of knots. Sure they make enough to return the investment to the funders; but they are not growing their businesses sufficiently.

We need to give funding with mentorship and guidance conditions. We need to grow leaders of businesses who are capable of making growth and development related decisions that go beyond subsistence and start to focus on greater economic development! Unless we just want to develop an entrepreneurial culture of mediocrity!


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