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Stop Believing That Startups Are All About Raising Money

Man picking up coin from streetMan picking up coin from street

The Entrepreneur Insiders network is an online community where the most thoughtful and influential people in America’s startup scene contribute answers to timely questions about entrepreneurship and careers. Today’s answer to the question, “What are some of the biggest misconceptions about startup life?” is written by Avni Patel Thompson, CEO and founder of Poppy.

“Why aren’t you more excited?”

I looked up from my phone as my brother asked me this simple question. Our first venture capital wire had just been deposited into our account and I was feeling a swirl of emotions.

It had been almost four years since I left a successful corporate career to work in the startup world. I had longer hours and less money, but felt I was finally making the impact I had always wanted to.

When I think back to before I took the leap, I realize I had had one critical misconception regarding startups. Many assume that startups are all about money—who got funded by whom and how much they got. I can’t begin to tell you how misleading that all is. A couple of years into my second startup, I can say with certainty that the money is just a front.

The real crux of startups is what the money buys: time.

I didn’t fully understand this until that first VC money hit our bank account, because it was in that moment that I started hearing the clock ticking. I had been expecting to feel liberated, but instead I felt heaviness. I had bought us time for a price, and it was up to me to ensure we didn’t squander it.

To go a little deeper, here are three more subtle misconceptions that all feed into the widespread belief that startups are all about money:

Funding equals validation

Before joining my first startup, I thought that if I only “got funded,” I would be on my way and receive some kind of market validation and approval. Nothing could be further from the truth. Funding only buys the time to prove the only validation that matters—the validation from your consumers. Viewing your funding in that light, you focus less on the perceived glamor of a certain VC and more on finding the right investors.

It’s all about the big milestones

The boring slog in between funding and press announcements is where the real fun lies. From the outside, it can sometimes seem like startups are a series of exclamation points. That may be true in the earliest days when you’re just getting started. Hitting growth or revenue milestones, hiring your first employee, raving customer feedback—these are all legitimate victories.

 

But the real rush comes when you realize you’ve secured a couple years of time to do the work necessary to build your company. In this early stage, you’re just trying to learn about all of the important levers of your business. That requires relentless experimentation and regarding nothing as sacred. If you’re growing rapidly with both current and new customers at this point, you’ll know you’re on the right track.

The perks are really important

Don’t celebrate anything that increases your burn rate. I used to look forward to the day when we would have hip offices with gourmet chefs and fancy perks. That was before I realized how much that all cost.

Poppy is zealously frugal. This might sound like an obvious approach, but pinching pennies can be a lot to ask of your team. By the same token, it also means that you have a team with you for exactly the right reasons. So when you hear about other companies celebrating with elaborate parties and events or visit their fancy offices, don’t forget what that comes at the expense of: precious time needed to grow the organization.

Startups can seem like magical, mystical places where there are dramatic highs and lows. And while slivers of that are true, the reality is that startups are where people go to effect change. But the only way to do that is if you first buy time to figure out how all that change is going to come about.