The time to act is always now
I didn’t really pay attention to the market turmoil over the past few months. My mind has been occupied by our business and what is happening in China. The well-being of my family and my company made everything else irrelevant. Yes, I was fundraising over the past 3 months, but for me, the difficulty isn’t something that’s out of the ordinary.
I went to Toronto for a few meetings last week, the general theme was “how is the challenging environment affecting us?”. I was taken a bit by surprise because I didn’t really associate our current hurdles with the overall market condition. I’ve always thought that our challenges were due to my own shortcomings. And therefore, things I can change and improve on.
I was introduced to a startup reporter on Friday to get some “founder’s perspective on the current environment”. Apparently, not many founders agreed to talk, especially on record because they don’t want to send negative signals. I didn’t mind sharing because I was never really good at sending “positive” signals to begin with. My message to our investors has always been pretty close to reality. And for an early-stage startup, that’s usually a range on the spectrum of diamonds covered in shit and shit wrapped in pure gold.
More importantly, I agreed to talk because I think my perspective could be helpful for those who are going through some difficult times. After all, our journey was described by some of our investors, as “a difficult business in an “unsexy” industry, that has gone through treacherous times. But somehow, still around.”
Fundraising has not been easy for the vast majority of companies.
The headlines are misleading and I think they are quite toxic.
The reality is, that fundraising hasn’t been easy for the vast majority of companies. The headlines we saw are as real as Instagram Influencers. X company raised Y million at Z billion evaluation is about as rare as Kim K among Tik-Tok “millionaires”. Who at best, get “free” trips to Dubai.
Are there more unicorns than ever before? Sure. But most of us are smart enough to know that ladies’ night doesn’t increase the mating success rate, for the vast majority of dudes out there.
Fundraising isn’t supposed to be easy.
Every single great entrepreneur I know had trouble fundraising at some point in their journey, regardless of the macro environment. The reality is, that those who have succeeded in the last couple of years had years if not decades of built-up, made of nothing but sweat and tears. They’ve had to endure years of pain from rejection and failure. And they've made hard decisions under excruciating pressures that would crumble most of us like f*cking croutons.
If it looks easy for them now, it is because they have put in the hard work for decades. They’ve built and nurtured their network for years. And they have proved themselves on the battlefield through the toughest times.
And that is true for crypto, real estate, startups, podcasters, and every single walk of life.
Your cousin’s cousin’s friend who didn’t have any experience and raised $10M at $100M post, pre-rev and pre-product, is as unique as the dude who found 30 Bitcoins saved among his college porn collection.
Fundraising isn’t supposed to be easy. Building a business isn’t supposed to be easy. Making money isn’t supposed to be easy. Anything worth doing isn’t supposed to be easy. Believing otherwise is simply moronic.
The only way to find certainty in an uncertain time, is to act.
“Did you regret not starting to fundraise last year?”
"Well, from hindsight, perhaps going out there last year could’ve yielded a better result. Or even better, I should’ve taken all the money in our bank back in May 2020, “invested” in Dogecoin options and sold it right at the top. So I can out-bid Elon to buy Twitter for $46-billion." “Oh, and I’ll take another $6-Bs to solve the world hunger of course.”
We live in an uncertain time, but the only thing that certainly has less value than LUNA, is dwelling on the past.
Many VCs are telling their portfolio companies that “the hard time is here and that the time to build is now”. That’s like NBA telling its players to “focus on playing basketball”. It sounds so obvious yet somehow, so necessary.
Perhaps, the reason why so many of us are lost is not that we didn’t know the importance of “building a solid business”. But specifically, “what kind of business?” More fundamentally, “is the goal of fundraising to build a great business? Or, is the goal of building a great business to fundraise more?”
Sure, in the perfect world, the Right answer is always both. We want to create a positive cycle of investment —> good business —> more investment —> better business.
But, we know as founders and as investors, that we live in an imperfect world. In which we are constantly torn between dogmatism and pragmatism, idealism and realism... And that the most difficult decisions are never between right and wrong, but always between shit and shittier.
Should I go all-in and grow at all costs for my next round and risk hitting the wall at 100 miles/h? Or should I scale down, and build a sustainable business but risk being “unfundable” by VCs?
Should I invest in a great operator with a solid business but might have trouble fundraising for the next round? Or should I invest in a great storyteller who will certainly raise the company’s book value but most likely won’t be able to execute according to the master plan?
These are the difficult decisions we have to take that could make or break businesses. Especially in uncertain times. But one thing is certain, the only thing worse than making the wrong decision, is not making any decision at all...
The time to act is always now.
I don’t know if today is the best day to invest or to fundraise. But I certainly know that today isn’t the worst day. Because given that the macro-economic environment hasn’t changed over the past 6 months (tightened fiscal policies), mathematically, today is about 25% better to invest in the Nasdaq than 6-months ago. Let’s be honest, the war in Ukraine has about the same impact on inflation and fiscal policies as our grandmothers’ opinion on our mating partners, a great excuse to use to get out of bad situations.
The truth is, none of us know exactly how things will evolve. No one could’ve predicted COVID. And all of us got very lucky as a result of the unexpected speedy COVID recovery. All but one exception, those who waited for the “perfect time” to take action. Those people are either still on the sideline, or worse, timed it wrong…
Yes, the risk appetite changes because of liquidity. Valuations change because of market demand vs supply. But regardless of the market condition, nothing changed fundamentally. Financing is an integral part of any business. And for CEOs, the job is to be constantly fundraising, passively and actively. A mistake that I have, unfortunately, made over the last few years. And for investors, the job is to be constantly deploying capital.
As a founder, I can’t predict the direction of inflation and interest rate. I can’t foresee the global impact of the Chinese Zero-Covid policy and its potential political instability. Even if I can, I can’t control the investors’ sentiment and market reactions to those events.
What I can control, is a finite set of decisions and actions:
I can improve my ability to become a better storyteller;
I can make better decisions to improve our business efficiency;
and I can create a Twitter account to get a free trip to Dubai. https://twitter.com/Nan_Theman
And the best time to take those actions still is, has been and will always be, Now.