In the startup world, “success” has long been measured by the ability to attract venture capital, secure large rounds of funding, and achieve high valuations.
I’m not here to say fundraising is meaningless for startups nor that it’s a piece of cake to get done. The problem is that fundraising sucks all the oxygen from other more crucial aspects of business development.
Worshiping false goals
Securing a significant investment is typically a cause for celebration in the startup ecosystem. It’s seen as a stamp of approval, a sign that the business is on the right track. This perception is amplified by media coverage and societal reverberation, placing fundraising on a pedestal.
And I’m not here to solely point fingers at founders and at the media. VCs are also a part of the problem and perversely incentivized. New funding rounds means that their portfolio gets marked up and they can show these numbers to their investors.
Myopia
When fundraising becomes the primary goal, there is a risk of misaligning incentives. Entrepreneurs might prioritize decisions that favor short-term gains in valuation over long-term business health. This misalignment can lead to unsustainable business models, a lack of focus on customer needs, and ultimately, a failure to create real value.
This glorification overlooks the fundamental objectives of entrepreneurship: solving problems for customers, creating value, and building sustainable businesses.
How we’re taking action
Understanding the pitfalls of overemphasizing fundraising, we at SaaSholic have taken a significant step in our last Annual Investor Day. We’ve instituted a pivotal segment in our yearly event to acknowledge and congratulate the founders who are excelling in a crucial metric for any SaaS company: Annual Recurring Revenue (ARR) Growth.
Annually, we will be bringing these exemplary founders who’ve reached specific ARR milestones ($1M, $5M, $10M, $20M, $50M, and beyond) to the stage to share their growth stories in front of their portfolio peers and our LPs. We intend to realign everyone’s focus on what truly matters: sustainable revenue growth and the long-term health of their businesses.
We believe this new tradition is a step in the right direction and hope it resonates beyond the SaaSholic walls. By celebrating real, sustainable business achievements, we set the best standard for what success means during the entrepreneurial journey.
