Why Tech Startups Shouldn’t Focus on Money

I’ve been running companies since the late 90’s. At one point in my music entertainment company, I had to manage literally hundreds of employees nationwide. Nowadays, I only have to manage anywhere between 10 and 20 employees. The first thing people say to me when they hear I have to manage so many employees is, “Wow you must make a lot of money if you can pay all those people.” And while I do make enough money to support myself as an entrepreneur, unfortunately without proper funding, my current tech startup is unable to pay full time salaries to the employees. To be perfectly clear, it’s not me that can’t pay them, it’s the company. That’s the first thing I try to make clear to everyone who asks me, it’s not whether or not I can pay someone, it’s whether my company gets funding and can pay its employees, just like me as an employee, I don’t get paid from the company, I have to work on my side projects and my other companies in order to make a living.

About a year ago, I was fundraising for my tech company, and for about six months I spoke to tons and tons of investors all around the country, traveling, going to meetings, and pitching. In the end, although I learned a lot, it ended up being a tremendous waste of time. During the six months, I could have been making better use of my time, which is why I always tell tech founders, don’t focus on money, focus on your product. If your product is amazing, and people like it, it will start to grow, and investors will eventually come to you. The challenge is that this is very difficult to do. The truth is that money always makes things a lot easier, regardless of what people say about how it doesn’t make things easier, that’s a huge lie.

When your lead programmer has a wife and kids, a mortgage, a car payment, school loans, health insurance, a grocery bill, and utility bills, etc., they need to pay those bills. If they work for your company and the company can’t pay them, how are they going to survive? It’s likely they have to take contract work on the side, which means they are not working for your company full-time. Ultimately, this means you will be moving slower than your competition who does have funding and can move much quicker. My advice is to keep your head down, keep your team focused, and work on making your product the best that it can be, testing it with your beta users, get feedback and suggestions, show it around your city, get an initial localized user base, or an initial round of sales of your physical product, and then iterate, repeat.

I’m not saying not to try to find a funding source, by all means you should definitely be talking to investors and forming relationships with them, as well as getting advice and suggestions from your peers, mentors, advisors, Board of Directors, and the investment community as a whole. Just don’t get tied up for months pitching investors who are saying they are interested, while they never write checks. Your goal is to find funding eventually to scale your company yes, but you also have to be focusing on your product the entire time, because if not, what you’ll find is that you have a great team, some traction and possibly revenue, great brand awareness through the press and media, but you’ll be lacking a thoroughly built product. It’s like a vacuum cleaner salesman from the 1950’s going door to door trying to sell a dustpan instead of a vacuum cleaner.

Focus on the product, not the money.



Jason Sherman

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