A lot of startups believe that the more money they raise, the higher the chances of success for their company. Counterintuitively, this is wrong. “The amount of money startups raise in their seed and Series A rounds is inversely correlated with success. Less money raised leads to more success. That is the data I stare at all the time. It makes little sense at face value but it is true based on more than two decades of experience in the startup world.” This is according to Union Square Ventures co-founder Fred Wilson, an early investor in Twitter and Tumblr.

Why does less money lead to more success? First off, when startups are chasing VCs, they’re spending less time thinking about their product and customers. Second, startups may not get the best advice from VCs outside their core business. And third, venture capital can put pressure on startups to get big quick which does not always serve long-term interests.  

Simple solution, right? Don’t go to a VC for funds…

Yet, we all know that companies sadly can’t run on Monopoly money. Raising outside funds is often necessary for survival, leaving you between a rock and a hard place. If you’re going to raise outside funds, it’s important to stop thinking about ways to get a maximum amount of infinity dollars and start thinking about modest ways to use the money you have and the money you raise. Treat it as your own, because it is.

Pressure Can Force Us to “Go It Alone”

Every founder wants to be in control. If they didn’t, they wouldn’t have founded their company. I speak from personal experience: I’ve co-founded four companies and I love being an entrepreneur.

But as a founder, it can be easy to fall into a trap of wanting to be in control of every aspect of your business. This is a dangerous trap. A great leader knows when to lead and most importantly, when to delegate. Surround yourself with the right team and success is much easier. No one should want to go it alone.

Pressure to Get Big Fast Leads to Errors

When venture capital comes rolling in, startups can feel pressure to rapidly build up a team and build a product. The money has to be put to use somewhere, right? But if you’re rushing to hire a team, you’re not doing the due diligence necessary to bring on the right people.

Hiring requires creativity and patience: Analyze your company. Identify areas where you need the most support and that are strategically the most important to your business. Make sure you spend a lot of time vetting candidates for both capabilities and culture fit. A bad fit from a cultural standpoint is not just a loss of productivity, but it diminishes overall productivity which impacts your whole team.

Consider both full-time employees and freelance talent to take your company to the next level. Freelancers can buy you time by giving you rapid access to senior level problem solvers while you find great full-time employees. We have worked with companies providing various freelance talent for them for over six years. It’s not that they don’t have the funds to hire full-time people, but they often can’t find the quality talent they are looking for, grinding their productivity to a halt. And sometimes, they just like using the right tool for each job — sometimes that’s via a W2 hire and sometimes that’s via a freelancer.

Above all, be patient and find the right people. You’ll know when the fit is right.

Pressure Can Lead to Tunnel Vision

Success in the long-run requires you to measure, learn, and change your product or service to fit the changing needs of your customers. And yet, when outside funds begin putting pressure on leadership, you might become obsessed with success to your own detriment. Rather than taking a step back and seeing the forest for the trees, you zoom in on unhelpful details to an irrelevant problem.

Take Blockbuster for example. They got rid of late fees and stopped asking people to rewind videos as a way of enticing more people to rent movies. Was the problem with late fees or with rewinding tapes or with the selection of movies it was offering? No. It was a technology problem. Streaming is better.

Change is a good thing. Don’t be afraid of it. I’ve had to pivot my companies more times than I can count. It doesn’t mean that I’m a failure or that the first ideas were bad, it just means it’s smart to recognize that data is valuable and when it tells you to pivot, go with it.

Don’t Let Pressure Force You To Make Bad Decisions

In the end, the quality of your product and the quality of your team are the most important indicators of success. Focus hard on the things that matter to your business and be patient in finding the right team to take your company to the next level. Pay attention to the trends affecting your customers and make sure you see the forest for the trees. A great idea is only as good as its execution.

Michael Solomon is an established entrepreneur and the founder of 10x Management, a prominent tech talent agency. He remains a sought-after voice in the business technology world and makes frequent appearances on Bloomberg Television, MSNBC, and BBC. Michael’s sharp eye for business has helped 10x Management revolutionize the technology sphere.

Posted by Outside Contributor

From time to time, we are glad to feature outside authors who contribute to BizzMarkBlog with their insights and experience. This is one of those features.