A private equity fund I know, once invested in a startup led by a rockstar CEO — or so we were told.
The startup raised seed capital of $100 million on day 1 — no kidding. Flush with money, they had a private jet parked at London’s Heathrow airport. Meanwhile, their revenues were not enough to even pay for the private jet charges.
And since the startup was burning millions of dollars every month, it needed more capital. But we were told — “Don’t worry, the ‘rockstar CEO’ will raise more money. In fact, that’s why we invested in him in the first place.”
And true to his form, the rockstar CEO would raise more capital, and again burn it away. The revenues continued to be piddly, and the operations sucked like a vacuum cleaner.
The investors kept rationalizing and pumping in money, until one day, when they couldn’t. Hundreds of millions of dollars were destroyed.
You can hide from reality, but not indefinitely. If customers don’t love your product, private jets, fancy offices, and fundraising can’t change it.
That is why, at my startup HabitStrong, we like to be very frugal.
Be humble. Stay grounded. Focus not on fundraising, but on customer happiness. Everything else is a distraction.
– Rajan