Money is not a problem

How many times do I hear this, per day?

There’s money around without a doubt, but that doesn’t mean you can get to it

How many times have I heard it over the last 15 years? Cocky VCs. Starry-eyed entrepreneurs. Journalists. Pundits. Influencers.

I’m pretty sure I’ve said it myself more than once.

There’s money around. They say. The banks have it. The investors have it. Look at the funding rounds year on year. Money is not a problem.

Dollars, dollars, dollars everywhere.

Valuations galore.

Exits for the masses. Success stories for all.

Isn’t that the fintech fairytale? Unicorns and hypergrowth?

Let’s face it, it’s the story we have chased or peddled for years. And for some, the fat lady sang and it all came true. A strong, straight line to heaps of cash and laudatory front pages.

And yet.

For most, that’s not how the story plays out.

Most start-ups fail.

Raising money is hard work and most early-stage ideas fail to raise any capital.

For those who do successfully raise funds, the photo-finish hides months of toil towards the raise and years of hard work in the business itself.

Even for those signing the cheques, the money comes with a story. With politics. With strings.

Money doesn’t seem to be a problem, sure… there’s money around without a doubt. But that doesn’t mean that you can get to it.

And if you do get to it, it doesn’t mean you will know what to do with it.

Money is not a problem, I hear people say. There’s money around. And it’s true.

But it’s also not the truth.

To have and have not

Here’s the thing about money.

If you are a start-up, money is not actual cash. I mean you have cash, of course.

But.

Money means profitability and this elusive notion of business viability that goes with making profit. In plain English, it means that you have worked out how to run your business (spend money) in order to do business (make money) in a manner that leaves you in the black.

That’s what established businesses do.

Valuation is not real money.

Even your own actual revenue isn’t real money before you get to net profitability.

What is my investor money in the bank then, smart ass, I hear you say, if not real money?

It’s the dreaded runway, friend. And runway simply means ‘when are we dying?’.

Let’s face it, if you are a growth stage company that hasn’t reached profitability yet, no matter how much money you raise, your cash is measured in units of survival. How much longer will you last? And what rabbits do you need to pull out of hats to either get to profitability or encourage the money (that isn’t a problem) to find its way to you for another round of investment?

A treadmill, you’d think.

Not a happy thought, but a sobering one, you’d think.

You’d think.

But actually, more often than not it isn’t any of those things.

Because we have created a hype cycle that treats valuation like it’s some sort of stand-alone, self-fulfilling badge of honour. We have created a narrative that treats the balance sheet as a thing apart. That doesn’t just say ‘we are investing in our growth and have a plan for becoming a sustainable business’ but actually says… ‘So? Don’t you wish your girlfriend was hot like me?’

Earworm for the day. You’re welcome.

But this piece isn’t about the arrogance of the fintech bros.

It is about what happens when you have money.

And when you don’t.

And the scary similarity of the potential net outcome, if you thought money was the problem you needed to solve and since money isn’t a problem, there is no problem.

Stay with me here…

It’s not about what it’s about

As a pre-profit business, if you have loads of runway what happens is… you spend it. Your team grows. You find you absolutely can’t live without extra people. And a bigger office. And you start doing extra stuff. For the product. For the team. For the journey. You start doing some grown-up things that you’ve seen big companies do.

You invest in your team. Your brand. Your mission.

You do the stuff you’ve always wished you had money for.

You do the non-essentials. The important finally coexists with the urgent.

You build to scale. Maybe too much scale.

You do stuff.

And it’s not stuff that necessarily brings profitability. You realise that. Not directly anyway. Not immediately. But it is important and good stuff.

So you do it.

And burn cash and runway, in so doing, directly and immediately.

If you have the cash, some bloating is inevitable.

And if you don’t have the cash? If your runway is measured in weeks or months?

Well.

First of all, you worry. You lose sleep. You stress.

You work round the clock. You all do. Even the unpaid interns. The passion is contagious. You burn with a holy fire to make every second count. And you know you will burn out but you can’t help yourself.

And you cut corners.

You will come back and redo that thing, whatever it is. The extra testing, the unhappy path edge cases, the scalability provisions. I mean, if you are worrying about survival, scalability doesn’t really get much headspace, does it?

If you don’t have the money, you burn yourself out and you sabotage your own product without meaning to. Often knowing you are doing it: if we survive, I will come back to fix this. And this. And this.

The space between too much and too little, over-abundance and scarcity is gossamer-thin. And although the starkest difference either side of it is money (the money that isn’t a problem), money doesn’t seem to be the answer that makes a difference to your fate. And that is a problem all right.

And it’s not just the start-ups.

Big companies are just the same. And I mean just the same.

It feels different but it isn’t.

Those of you who have done time in a big organisation will know how impossible it is to get budget for anything. An extra engineer. A better chair. A POC.

A wireless headset back in my banking days needed sign-off from my boss’ boss’ boss. $130 and a lot of questions about who thought that was a good idea as a control mechanism.

The bank may have two private jets but the budget for biscuits in the coffee room was slashed years ago. The bank may have a balance sheet in the high billions but you try and find budget for a new piece of software or a brand new initiative without planning it three years in advance and baking it into a million budget proposals in the hope that one isn’t slashed… then we talk.

The money is there all right.

The bank can afford these things.

But somehow it thinks it can’t. So it doesn’t.

This is important folks. The bank thinks money is a problem internally. So it becomes an insurmountable obstacle.

Being able to achieve things without budget was my banking superpower. Meanwhile, I was fronting organisations with AUM in zeros enough to make your head spin.

So start-ups struggling with their ever-decreasing runway will have big-name banks asking them to do POCs for free because there is no budget.

Banks will invest in companies and then undermine the investees’ profitability by being unable to find the money required to be a customer of the company they just invested in, in the hope that banks like them will do what they couldn’t.

And yes, that second pot of cash would need to be much smaller.

The point is not the money. The money is not a problem. The problem is what you do with the money.

And that is both an active thing – how you spend it, what you make it work towards – but it is also a reflex thing that happens once a business reaches that coveted stage of sticky, repeatable revenue-generating bliss. It develops muscles. It finds its sea-legs. It grows into its purpose and spending money to make money becomes instinctive. You don’t even realise that is what you are doing, in a stable business.

So working out how to spend money to make money in brand new ways is an extreme sport even for those who’ve successfully done it before, who are successfully doing it elsewhere across their estate right now.

It’s not about the money existing. It’s about the thing you want to put the money towards not existing.

So please send a silent salute to those who manage to do this. Be it in a start-up or a big corporate. This stuff is hard. And the money isn’t what makes it hard.

Doing something new is hard in itself.

Putting money towards something new is not something that comes easy.

To anybody.

The start-up will do too much or too little, some corners will be cut, some bloating will ensue, some dead ends will be found. Again and again.

At least the effort is there. At least we are trying to do the new stuff.

The bank?

Frankly.

The bank is pretty much the same.

If the money is needed for the things we’ve always done, no problems. That bit we’ve cracked. It’s a profitable business and it got there by working out how to spend money to make money. But that doesn’t travel across functions. So when the successful business tries to do new things, you know what happens, right? It gets hard. Spending the money gets scary. The money gets scarce. Finding it, working out what to do with it. It all becomes a bit of a problem.

And of course, there is the other thing.

Having or not having money doesn’t have the same effect on folks, funnily enough.

Having money may make you complacent. Having money may make you timid and scared to take risks. Having money may make you cocky and self-assured in ways that don’t correspond to your success, but having money may blind you to that too.

Having money may get in the way of doing something that you would have done faster and better if you didn’t have the money. If you were with your back against the wall and you had a choice between doing something with nothing or going back to your old job in the bank and spending your time not finding money to do the small things while you are surrounded by piles of cash nobody can access.

And not having money?

It may focus the mind, sure.

But let’s not romanticise it folks.

It also creates stress and stress reduces creativity. It damages people’s health and hurts their relationships. It also hurts the product, the vision they sacrifice everything else for. It makes it inevitable that choices have to be made, corners cut. If you are counting days, you will have to work out what you have time and juice for and do that and only that. Or shut up shop.

So yes, money ‘out there’ is plentiful. But not everyone can get it.

And having it is often as much of a problem as not having it.

So many other things matter.

Talent, luck, temperament, timing, passion, perseverance, grit, creativity, team spirit… luck, again… and did I mention luck?

They all determine how you spend the money you have, how you go about getting the money you don’t have, what you do with your time in between.

So don’t tell me money is not a problem.

It most definitely is a problem.

Whether you have it or whether you don’t.

It just isn’t the problem.

Doing the hard stuff right in the time you have is the problem. Money is just how we measure time.

So don’t talk about valuations and budgets. Talk to me about the time you have. What you are doing to secure more of it is much less interesting than what you are doing with it.

#LedaWrites

Leda Glyptis is FinTech Futures’ resident thought provocateur – she leads, writes on, lives and breathes transformation and digital disruption.

She is a recovering banker, lapsed academic and long-term resident of the banking ecosystem. She is chief client officer at 10x Future Technologies.

All opinions are her own. You can’t have them – but you are welcome to debate and comment!

Follow Leda on Twitter @LedaGlyptis and LinkedIn.