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Why Startups Should Not Look For External Investment

why startups should not look for external investment
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STARTUP

Why Startups Should Not Look For External Investment

Beginning a startup is not an easy task. The founders are required to look for investors and raise capital as much as possible. They have to wait for long to meet and convince investors for the same. Moreover, some of them also try to convince random financiers for the purpose of raising the capital. That is, in fact, a necessity for the startups so that they can expand their business and develop their products and services in a well – efficient manner. Well, raising a capital is one of the most crucial elements when it comes to startup foundation.

Well, investors play a significant role in shaping startup ventures. But one thing should be kept in mind that external investment is not necessary for startups all the time and may not prove to be beneficial at all. Let us delve into some of the reasons as to why the startups should not look for external investment.

  • Wastage of energy and time: Most of time, few startups are so busy looking for fundraisers that they lose their attention on the improvement of products and ideas which are the crucial elements of their business. The amount of time which they have spent convincing an investor could have been spent on developing their ideas instead. Time and energy wastage is not something which should be taken lightly by any startup.
  • Generation of revenue: Revenue generation should be the primary focus of any startup. However, many of them lose focus on this important element when they have excess of funds on their account. Startups should instead look for small amounts of cash generated through their own savings so that they can focus on revenue generation.
  • Requirement of huge funds: Many startups feel that their main motto is to raise fund so that they can develop their business and transform themselves into a larger organization later on. But one should always remember the fact that ‘Rome was not built in a day.’ The same goes for startups too. They can expand their business through less fund inputs and more teamwork and strategies in order to incur profit in the long run.
  • Equity for cash: Most of the time, startups end up giving their equity in return for cash. This leads to the involvement of that particular investor in every terms of their business which is actually not a good sign. Imagine being the owner of your own company, what if you had to explain every aspect related to it to a complete stranger! Moreover, you will also have to share huge amounts of profit with the investor who actually had no input in developing the business.

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