David Moody, Staff Writer & Business Consultant at Jacksson David, LLC
Lottery Winners and Funded Startups: Why do 70% of lottery winners go bankrupt? Simply put, they aren’t ready to handle all that money. They don’t have the basic infrastructure, qualified people and strategy in place to manage their windfall responsibly.
The same can be said for many startups. It is common for founders to think that their great idea will be the next big thing if they only had enough funding to make it happen. Funding, they believe, is the key to their success. In my experience, this is typically not the case.
Most startup founders have not done the necessary bootstrapping to have the operational infrastructure, market validation, and key personnel in place to ensure that the funding will be spent responsibly and take them to the next level. In fact, too much funding, too soon, will likely exacerbate their current problems, expose others they didn’t even know they had, and create new challenges they never anticipated. My observation is that most early-stage startups need hands-on support, mentors, and accountability far more than they need significant funding.