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Is a startup’s funding status a valid metric for success? Hint: no

(OPINION EDITORIAL) Funding sounds impressive, but is it really indicative of where you stand in the market place?

cash money

How would you measure it?

Allow me a moment to rant, but I’m worried that a startup’s funding status is now the metric for “success.” I ask myself, has the world become so IPO-centric, that anything short of that isn’t an indicator of success? Why aren’t we measuring success by P&L statements?

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To that end, I ask you to consider that instead of one’s funding status being the meal ticket to another level, it seems to me it’s just one of several signs that someone feels they can make money off you. In other words, while it’s true that raising capital means a select few believe in your potential, by no means does it mean you have a guaranteed success on your hands.

It’s academic really, and just scratches the surface in terms of how successful you are (or aren’t). It is certainly a viable method of growth and nothing to be bashed, but aspiring entrepreneurs often think it’s just free money that falls from the sky, or a badge of honor. Let’s dig into that.

The top ten – really?

According to a recent study, the top ten US startup cities last year were: Silicon Valley, New York, Los Angeles, Boston, Chicago, Seattle, Austin, Atlanta, Denver/Boulder and last but not least Philadelphia. Now as with any list, you can argue how valid it is. Any list can be manipulated or skewed in order to support one’s particular agenda. In this case, MacPherson’s argument is that the Big Apple is growing by leaps and bounds as seen by – here we go again – the amount of seed money being thrown around by investors.

But again I ask you, is the criteria valid?

Inc postulates on “5 Metrics That Don’t Measure Startup Success” and funding/capital raise is at the top of the list.

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Smoke and mirrors

I concur, by the way, that NYC is on fire in terms of startup success. But I also feel that achievement owes itself to a number of attractive variables, and not all of them equate to money. Some other over-used metrics to consider:

How many people you’ve hired
The more people you hire, the more successful you are, right? Not really. Could be you’re just really ineffective in personnel management.

How many users you have
What matters at the end of the day is how many customers you have, how happy they are, and how often they use your product.

Customers pay you. Users don’t. Another often useless metric.

Where you’re selling
So you’ve opened a hundred stores and your product’s on thousands of shelves. As great as that sounds, it doesn’t mean you’re adding more customers. The more stores you have, the higher the risk that your inventory won’t sell.

If you’re unprofitable in one store, adding more won’t turn it into a healthier business.

The top ten [again]

The fact that the startup landscape is expanding beyond the Silicon Valley takes nothing away from the Valley. Heck, the playing field is big enough for everyone.

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For example, our own COO opines that Austin’s identity is not popped collars and IPOs – success is seen in the margins.

Did your company make more than you spent this year? Did you coldly lay off a division and then pop champagne?

Austin is one city (and I am not from Austin by the way, just calling it like I see it and AG is headquartered there) that seems to distinguish itself by performance, not funding status.

I tend to think a lot of other up-and-coming cities should follow the same mantra.

#StartupSuccess

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Written By

Nearly three decades living and working all over the world as a radio and television broadcast journalist in the United States Air Force, Staff Writer, Gary Picariello is now retired from the military and is focused on his writing career.

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