Startup Business Funding: 5 Business-Breaking Misconceptions

I've been an alum of Dreamit twice. The first time, back in 2012, I joined as part of a mobile gaming company. We didn't have a live product, but we had an insane buzz around us, with a successfully funded Kickstarter campaign and 'The Next Angry Birds' quote from Techcrunch. 

We spent most of that summer developing the product while carving out time to meet investors and try to raise funding. I probably met with 20+ investors, including Fred Wilson and Josh Koppelman, and both rejected our company as too early.

We eventually launched the product, which didn't generate enough revenue to support us- so we shut down the business after all my credit cards maxed out. 

That summer in Dreamit was the most important class I've ever had in my life. I learned more there than in six years in college and six years in Intel.  

With some tough-learned lessons, it was clear to me that my new (and current) business Slidebean would not make the same mistakes. 

I had a clear 3-step plan:

  • Not going out of business. This business would generate revenue ASAP to avoid depending on investors and rounds of funding. 

  • NOT spending time on the accelerator building the product. The product should be live if we hope to raise capital. 

  • The most valuable resource the accelerator provides is the network, so use all my time to navigate that network. 

The plan-sort of worked. Slidebean is alive and growing, and we've been profitable for years (yay!). 

Being self-sustainable has given us a new perspective on startup funding, especially compared to what I experienced on my first accelerator run.

With this new perspective, here are some of the misconceptions we overcame regarding startup funding: 

1- Joining an accelerator will get you funded 

Accelerators like to brag about the success rate of their portfolio companies using a measure of 'funded companies' after the program. While this is totally understandable, I believe it creates the false notion that accelerator = funding. It did for me, at least. 

The press enhances this misconception around YCombinator demo days, where the 3-day pitch event is perceived like an auction, with investors fighting each other for the best deals. 

Here are some truths about what accelerators can be for startups:

  • A small filter. You are more likely to get a meeting if an accelerator has filtered you. 

  • A HUGE network enhancer. The partners at the program will be willing to introduce you to their network, not only investors but (mainly) potential clients and partners. 

  • A program to get your company 'accelerated'- selling faster, moving faster, which does not necessarily translate to capital. 

Your ability to raise funding depends on your traction, on the potential of your business and how much de-risking you've done. 

 
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2- You'll meet your lead investor in Demo Day

That's not how Demo Days work, and it's one of the reasons Dreamit eventually replaced it for the Investor Roadshow. 

Many programs still put a lot of focus on demo day rehearsals, prep, and on getting the pitch deck just right. Don't get me wrong; the pitch deck is a crucial document (trust me, it's what we do). Your investor deck needs to summarize a company story into 10 or 15 slides and hit all the high notes in a few minutes.

In my experience both with DreamIt and with 500 Startups, Demo Days are part social event, part formal deadline to get companies on a sprint towards the end of the program. Few (or no) companies manage to raise money from investors they meet there, and if they do, it's because their rounds are already partially committed. 

3- If you have an idea + a solid team, you can raise capital 

What I failed to understand the first time in Dreamit was that ideas rarely get funded- but that's not the picture that is painted to us entrepreneurs. If you browse pitch deck examples from companies like Airbnb or Uber, you’ll see that they had little to no traction when they raised capital the first time. 

Many early-stage entrepreneurs believe funding is the first step on the journey of building a business, and that is NOT the case. It's possible to raise capital with a great idea, yes, but you need to be a fantastic hustler, or if you've sold businesses in the past, or if you come from an Ivy League school. 

But 2012 me, a first-time half-Latino half-African-American founder from Costa Rica, coming from a university these guys had never heard of, nope. 

We foreign/minority founders come with increased risk, and that's the hard truth. Our ability to recruit talent may be affected if we are based outside significant startup hubs. Our ability to relocate to the States depends on our ability to get a permanent resident visa, which is not only hard but expensive. Our ability to raise further rounds of funding is affected for these same reasons. 

4- Any startup can raise venture capital

I've also seen a misconception on business types, versus their ability to raise venture capital. 'Traditional,' non-exponentially-scalable business can't necessarily raise funding from investors. 

In the end, it comes down to market size, and the company's ability to own a significant portion of that market, while making high margins.

We published a video on traditional businesses vs. 'tech' startup companies. 

 
 

Steve Barsh, one of the Dreamit Partners, also made a great video about calculating the market size; you should watch it. 

 
 

5- Venture Capital is the only way to scale 

Raising more funding does not equate to business success; on the contrary, it puts extra pressure on the founders and the team to deliver on the promises they made. Each new round of funding is a new promise that you are going to grow bigger and bigger. 

When we understand that startup capital is simply a means to an end, we can start thinking about other ways to get to that end: an exciting, dynamic business that makes money and grows. 

I've been in the startup world since 2012 and only recently started finding content addressing this topic (take a look at the Startup Therapy podcast and on Josh Pigford's blog at Baremetrics). 

Series F-funded business, growing 400% YoY are admittedly more exciting than bootstrapped companies. If you dig in, you'll find that GoPro, Techcrunch, GitHub, and Patagonia were all bootstrapped, but that's not the point here. The point is, you don't have to aim at being the next (insert unicorn name here). 

Understand what your company is, what it can become, and plan accordingly. If you can raise money, do it. If you can't build the best business you can create. 


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Jose “Caya” Cayasso is the co-founder and CEO of Slidebean, an automated, AI-powered, cloud-based presentation tool. In 2011, he founded Pota-Toss, a Kickstarter-funded iOS game, released on the App Store on October 2012. It was deemed by Techcrunch and CNN as 'The Next Angry Birds' and was downloaded over 300,000 times. The company then evolved into Saborstudio, a digital marketing consulting agency. In November 2012 Caya was selected as one of 40-Under-40 Costa Rican innovators, and he was a featured speaker on the 2013 TEDx PuraVida Conference. In mid-2014, Caya started Slidebean. As CEO and head of the marketing team, Caya has led the company's expansion and growth into a profitable, $1MM+/yr operation that employs over 25 people in the US and Costa Rica. Slidebean has been featured in Techcrunch, TheNextWeb and The Economist, as the third most valuable internet startup in Costa Rica.