I really don’t like the idea when a ‘normal‘ startup seeks for ‘external‘ investment only for R&D. In this small post I will try to explain my points.
In last few year I invested in few startups, but I had the opportunity to work closely with even more other startups too, mainly because of my role at TheTechJournal.com and part of the time I try to give back to the Startup Ecosystem. Here my thoughts on based on my experience, its not a research/academic paper with bunch of reference.
Let me begin with why I highlighted those two term.
normal – Here normal means normal, general startups. Sometime big corporation or group form startups solely for R&D, I dont mean those.
* Interesting read could be – Cisco’s Billion Dollar Spin in Startup investments
external Here I meant taking investment solely from out side of the company, co-founders.
People takes investment for different purpose and goal, and yes, R&D is one of them. I have no objection with that. My problem is when you dont have any revenue stream, and you want more money to burn in R&D.
Why it’s bad?
1) External investor could be a real pain, and when you are not making money, and spending solely on R&D it will be very hard to keep them in same page year after year.
2) You dont have cash-flow, no revenue stream, you have not tested water, then more investment for R&D is really risky idea.
3) But you think you will make an amazing product/service/technology. The catch is every other startup thinks the same, and still 85% or more startups historically fails.
There are several exceptions, here I mainly considered the kind of startups I came across. If you look at really technology or innovation focused startups, R&D is their main product, their main selling points. So, please don’t try to put company like SpaceX or others in this theory.
As always be lean. Ship the minimum viable product first, test customer base( test water), focus on marketing, track the traction, redraw the roadmap from those data. Remember its not only about your product, its also about your customer, and how they feel about your product. So, building a good product is merely half of the job. So, optimize your focus.
Again, those are just my thoughts, you are encouraged to give your opinion in the comments below or any social media you found me.
Image: Public domain