HOW AN EARLY STARTUP SUCCESS CAN BE DECEPTIVE.

Don’t wait, get going with it the same moment you have a good story to tell.

There it was, our inaugural triumph – the first significant milestone for our fledgling startup. In the early months of 2017, shortly after launching our application, we achieved a major milestone by securing our initial substantial customer: a well-known company in the German fashion and retail industry. Throughout the inaugural year of our product’s availability, we secured ten substantial trials, a commendable portion of which transitioned into customer relationships in the subsequent twelve months.

As we basked in this success, the question arose: What next? Although the investor presentation had been in development for some time, patiently waiting in the wings, we, being self-financed until then, were in no hurry to unveil it. Numerous tasks demanded our attention – building the pipeline, refining the product, and managing the administrative and bureaucratic aspects we would have preferred to overlook.

Our reluctance to part with equity, perceived as the costliest means of financing for the company, kept us from looking for an investor throughout 2018 and 2019. At the time, there were valid reasons to entertain such thoughts. The end of 2019 approached, and things were still progressing relatively smoothly. Although the revenue stream hadn’t kept pace with our expectations fueled by early successes, we remained optimistic. Concerns about dependency on a small customer base were countered with a strong confidence in change in the coming year – a reassurance bolstered by ongoing discussions with a Family Office interested in investment. The paperwork was signed in January 2020, only to witness the evaporation of our entire pipeline two months later, courtesy of the unforeseen arrival of the COVID-19 pandemic.

Enter Corona – a disruptive force that altered our trajectory. The costs, which had risen due to the hiring of our first employees, including expenses for laptops, phones, office space, salaries, and more remained solid while the revenue forecast became very uncertain in March. Instead of investing in the company’s future, we found ourselves consuming the Family Office’s funds to keep the lights on. When the pandemic began to recede, our financial resources were depleted, and the investors were unwilling to inject more capital.

Lessons were learned, but unfortunately, they came too late. The two Corona years, coupled with the slower growth in 2019, left us with a less-than-ideal track record. Securing additional investors proved challenging and ultimately unsuccessful. Meanwhile, our competitors, who had launched their products roughly at the same time as we did, had seized the opportunity, securing investors, maturing their product, and gaining a competitive advantage while we hesitated. Their investors, having committed before the onset of Corona, demonstrated patience and support, a luxury we lacked.

Onboarding investors during the early stages of our success could have been a game-changer in multiple ways. With a solid early track record, attracting companies willing to invest in us would have been more straightforward. Our product would have been more robust when the pandemic hit, and our customer base, likely more extensive, would have alleviated the pressure to acquire new customers during an economic downturn. Rather than having to deal with clients who made us victims of their cost-cutting.

In summary, regardless of how promising your start may be, securing investors, and preferably more than one, as early as possible is imperative. Don’t wait, get going with it the same moment you have a good story to tell.

Jürgen Müller is an IT industry veteran, founder, coach, book author