Entrepreneurs around the world will tell you the safest way across the startup Valley of Death is with a canteen full of investor dollars over each shoulder.
There are numbers to back that up. A Gompers and Lerner study showed 90 percent of new ventures that do not attract investors fail within the first three years.
I’m certainly not going to argue against the importance of early stage investment. It’s absolutely true that most successful startups make it because investors allowed them to grow the business in ways that wouldn’t have been possible otherwise.
But there are other ways, alternative paths that not only allow a company to survive but better prepare it for long-term success.
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Scott Moscrip founded Truckstop.com with some seed money from his father — the earliest of early stage investors, but also the only investor in the company’s first 20 years. It forced Moscrip to learn how to run the business and be profitable without a safety net.
Securing investment is great, but finding a way to turn a profit without outside money is a valuable skill. I’ve seen startups that raise a lot of capital early but fail because they never figure out their business model.
Money is no substitute for business acumen and old-fashioned networking. That goes for a startup or a mature company. The time to network is long before you need money. Get to know customers, partners and, yes, investors, before you need to know them. Nurture relationships, and get to know people as well as you might know their firm.
Truckstop took on its first outside investors last year with Bregal Sagemount, and the decision to do so came down to finding the right partner. We were looking for someone who could help us with our growth strategy, who had expertise in logistics, marketplaces and payment networks and, most importantly, for people who aligned culturally with our team. We wouldn’t have moved forward unless we could check all of those boxes.
The bottom line: Investment can be a good, vital thing to any business — especially a startup — but it can’t replace sound business practices and strong relationships.
Paris Cole is chief executive officer of Internet Truckstop Group and was a presenter at the Idaho Technology Council’s 2016 Capital Connect Conference. This column appears in the May 17-June 20, 2017, edition of the Idaho Statesman’s Business Insider magazine. Click here for the Statesman’s e-edition, which includes Business Insider (subscription required)