TLDR:
- News startup, The Messenger, failed to raise $50 million and is shutting down.
- Lessons for entrepreneurs include avoiding reliance on venture capital, attracting investors through limited capital and success, and building a business that meets an unmet need.
The Messenger, a news startup, recently announced that it is shutting down after failing to raise $50 million. This outcome is not uncommon in the startup world, as many unicorn dreams have ended without the support of venture capitalists. In fact, 94% of billion-dollar entrepreneurs did not rely on VC funding, and 76% avoided it altogether. This article highlights seven key lessons for entrepreneurs who want to build a successful unicorn and not be dependent on the flawed VC model. These lessons include:
- Finance Smart: Entrepreneurs should aim to finance their ventures without relying on strangers. By finding opportunities and developing strategies to take off without VC, entrepreneurs can finance their businesses with a mix of internal cash flow and finance-smart capital that they can control.
- Make VCs Come to You: Successful entrepreneurs like Mark Zuckerberg and Jan Koum became wealthy by starting with limited capital from family, friends, and angel investors. By achieving significant success with limited funding, entrepreneurs can attract VCs rather than begging for investments.
- Avoid Faking It: Building a business based on false or exaggerated claims can lead to failure. Investors are now more skeptical following high-profile cases like Sam Bankman-Fried and Elizabeth Holmes. Entrepreneurs should ensure their business fundamentals are solid and avoid suspicion.
- Differentiate Between Tech and Media: The success of a startup may depend on its stage within an industry. While Yahoo.com was both a media and tech startup, it emerged during the early days of the internet. Today, the internet is more mature, making it difficult for media startups to compete against established tech-media companies.
- Identify Unmet Needs: Entrepreneurs should focus on emerging trends and find unmet needs within those trends. The Messenger’s focus on promoting a specific political figure may not have addressed a significant unmet need, which can impact its chances of success.
- Implement a Finance-Smart Strategy: Successful entrepreneurs use finance-smart strategies to dominate their industries with less capital. The Messenger’s high costs and low revenues indicate that their execution was not finance-smart.
- Avoid Multiple Rounds of VC Funding: Entrepreneurs who reduce their need for multiple rounds of VC funding have a better chance of staying in a leadership position and reducing dilution. Maximizing the impact of each dollar raised and avoiding unnecessary expenses are key factors in achieving this.
In conclusion, entrepreneurs should focus on building a business that can thrive without VC funding, attract investors through limited capital and success, and meet an unmet need in an emerging trend. By following these lessons, entrepreneurs can increase their chances of building a successful unicorn.
