Why Do We All Praise Startups When They Receive Funding?


Alyson Shontell | Oct. 19, 2011, 6:00 PM

Gary Vaynerchuk

Gary Vaynerchuk is a Techstars mentor and founder of Vayner Media.

Image: Alex Harris

Funding announcements are very boring, both to read and to write.

But they’re covered everyday on tech sites, whether an entrepreneur has raised $400,000 or $400 million.

The amount of money raised has become a way some people benchmark a startup’s success. The more an investor pours into a startup, the better the startup’s idea and team must be. It will have enough money to live a little longer, at the very least.

That logic is a bit twisted.

Last night on the season finale of Bloomberg’s Techstars show, one of the founders said he spent the summer generating revenue rather than raising a round of financing.

No one in the audience applauded. But they did when Onswipe announced a $5 million round and Crowdtwist announced a $6 million round.

Techstars mentor and successful entrepreneur Gary Vaynerchuk took notice and made a good point.

“I’m concerned a little bit with the culture of celebrating the fundraise,” he said. “My dad taught me that when you borrow money it’s the worst day of your life. We didn’t clap for Red Rover because they didn’t raise $6 trillion, but I was sitting here like, ‘Good stuff!'”

Instead, Vaynerchuk looks for other entrepreneurs who know how to make money.  “What I’m looking for are people who are not caught up in the excitement. Even though I’m a hype man myself, I like the practicality of it all. People who understand how to turn a profit. At the end of the day, this is still business so I’m looking for real practical knowledge of how to actually make money, not necessarily raise it.”

[Source: http://www.businessinsider.com/why-startups-praised-for-funding-2011-10]

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