To entrepreneurs, raising a first round of capital is a validation of their startup’s business model. To VCs, it’s a grace period during which entrepreneurs must demonstrate some traction and certain KPIs to earn follow-on funding.
There are several mistakes that startup founders make after raising their first round of funding that prevent them from raising a second round; hiring quickly and losing focus are common mistakes, according to Amir Farha, Managing Partner at BECO Capital. “They may have focused so much on raising capital that they’ve deviated from the actual core business. One of the challenges they have is to refocus their attention on the right things that matter,” he told us in an interview.
Besides steering away from the startup's core business and rushing into staffing issues, a lack of market expertise or startup experience will put entrepreneurs on the wrong track. “The ones who fail are the ones who don’t build enough knowledge of their company,” Farha said. “They need to be data-driven, understand KPIs and what the drivers of their businesses are. That’s something they have to build in from the beginning.”
In order to usher startups along, BECO Capital is providing its portfolio companies with services that go well beyond financial support. “We’re very hands-on with our companies. We spend a lot of time helping them with strategies, building partnerships with specific companies or telecoms. We help them with business development, getting customers and hiring talent. I think hiring talent is probably the most difficult job a VC can help with because as the company scales it needs to hire really good people.”
How do you define failure?
Failure, in the words of Farha, is not just closing down a startup. “It’s when the entrepreneur hasn’t done all he can do to get his business off the ground. Some entrepreneurs may be lost or don’t know what they’re doing, but as long as they give it their best shot and are open to learning and accepting things, [even if they fail] that’s okay.” Failing because there’s no market for the product is one thing, and failing because there was no effort exerted to get the business off the ground is another.
In the middle of our chat, Farha shared with us BECO Capital’s portfolio of companies’ most difficult request, and why it is so difficult to fulfill. To hear what he had to say, be sure to watch the video below: