In recent months there was a lot of talks about launching different types of governmental backed incubators, the facilitation of obtaining non-refundable aids with a focus on tech startups and so on.
It is a very wrong and conventional wisdom that the only obstacle to the success of a startup is that initial seed capital that is now apparently easier to get. Many people think if they were able to find that magic several thousand euros for starting the job, everything later would come easy. Unfortunately, very often it is not. I believe that most people, if they would actually get the money, they would be faced with the reality and would ask themselves, "What should I do now?". I should know, I was in that situation!
If you give money to startup and let it to swim around by itself, not providing it with a variety of additional services, you have condemned it to the brutal statistics. It will probably be one of those startups, which will quickly fail and will not reach their potential. There are many other things that are more valuable than money itself and which are likely to be crucial in order to be among the small minority of those who will succeed. The more added value comes with money and investors, the "smarter" money gets. It is often said that experience of the person who gives his money is more valuable than money itself.
#1 Startups needs money which will surround it with a successful people
The biggest advantage of excellent investor comes in the form of people who surround them. No matter how interesting your project is, if it do not attracts great attention of investors, you will hardly attract attention of great mentors, because one goes with the other. There are lessons and skills that can be learned only from experience. Mentors are people who have been several times on the road that you stepping to and they are willing to share their stories and experiences with you. The important thing is to find a mentor who can set aside time for you, who knows the industry and able to anticipate problems before they happen.
#2 Startups need money which will open them many doors.
During development a need for different types of partners will manifest. With no experience and no knowledge of what you'll be just engaging, very probably you still do not have the contacts that will later be indispensable. Successful investors are people who have already created excellent contacts and will open many doors that you did not know they even exist. Help with finding the next round of investors, suppliers, customers can be crucial for the development of your project. Maybe the most importantly, with the help of good recommendation it much easier to attract top talent to your startup
#3 Startup needs money that will provide quality sparring partners
When we start a project we are completely confident that we have a superb idea. Then, after a while, after many hours in conversation and reflection with different people we realize that it is not only necessary to work hard, we also need to work smart. We need to spot week spots of our idea and where we need to focus. When we understand this, move back to the drawing board, look at things from a new angle, patch the holes and go back into the ring. It is a process that never stops and sometimes there is a need for a drastic change in the business model or product itself for the project to be viable and sound. Experienced investors will help us to find those holes in the boat and patch them before they sink i.e. before we run out of the money.
#4 Startup needs money to keep it lean and scalable
In early days of his project you will have access to a very few resources and you will have to have a good think in how is the best to allocate them. You will have a continuing need for work place or access to the Internet. As well you will have an occasional need for a great designer, lawyer or PR specialist who will be needed only when it suits to you. There are many successful incubator and accelerator networks which invest in startups, cooperate and allow their users to share a number of different services. Another advantage of the program is the assistance you can get from a number of teams that are in a similar situation.
When you look at the times which we live in, we can see that today is the best time to launch a startup because entry costs were never lower and capital was never more accessible. Money which doesn't have added value will certainly help, but mostly just to get rid of short-term liquidity problems, while your "smart money" provides a better chance to build a successful and sustainable business around your project.
As initially published on Netokracija: www.netokracija.com/zasto-bespovratna-sredstva-nisu-smart-money-45474