I was speaking with another investor recently. We were talking about one of the companies where he’s a co-founder. Although he’s not operationally involved, he helped pull together the initial team and secure the company’s first angel funding.
When the company was first formed, the founding CEO wasn’t stepping up to the plate. He was reluctant to take leadership and was going through the motions of building a business rather than actually building one. As a result, the company found it difficult to raise money. Although they completed a small angel round, the company couldn’t settle on a business model, there were problems among the founding team members, and there was insufficient product progress being made.
Then the company’s angel funding ran out. The founding CEO was faced with two options. Either he would shut down the business, or he would personally finance it. He chose the latter approach, selling his home and putting up an important portion of his net worth into the company.
That’s when the company experienced a step change increase in its performance. The CEO settled on a business model, restructured his team, and shipped a great product. Seeing this progress, investors started knocking on the company’s door. The company has yet to become a runaway success. However, it’s certainly headed in the right direction.
It’s only when the entrepreneur felt like he had no options left that he came up with the inner motivation and resourcefulness to build his business. Necessity is the mother of invention.
Also published on Medium.