Letter from Investors to Startup Founders
Subject: Please Stop Burning Money Like Agarbattis at a Temple
Dear Founder,
We don’t mind you being ambitious. What we mind is you turning into “financial pyromaniacs” burning cash in the name of growth, without realizing that money isn’t oxygen, it’s blood. Lose some, and you look pale. Lose too much, and you’re gone.
We’ve seen it all — shiny machines, overpaid COOs, 50% discounts, and influencers who eat free snacks but never post. So here’s our brutally honest catalogue of where we’ve watched founders dig their own graves.
1. Capital Expenditure: The Shiny Toy Syndrome
Remember when a Jaipur cold-chain startup bought ₹3 crore refrigeration units before even signing their first farmer? For two years, the machine sat like a giant almirah, humming quietly while investors hummed funeral songs.
Lesson: A fancy desk never won a customer. Progress is sales, not stainless steel.
2. Rent vs Purchase: The Great Land Romance
A Delhi founder proudly told us he’d bought land for a warehouse. We asked how many customers he had. He said, “None yet.” It was like buying a wedding hall before finding a bride. Contrast that with “Fresh To Home” they rented facilities until scale justified ownership.
Lesson: Flexibility first. Commitment later. Unless you’re in Bollywood, don’t book the set before the script.
3. Outreach: Hoardings Don’t Cook Food
One Hyderabad snack startup blew ₹50 lakhs on metro station hoardings. Impressive, except their website wasn’t working that week. Another team made 200 real phone calls to kirana shops and got more traction in 10 days.
Lesson: Customers don’t live on billboards; they live on WhatsApp.
4. Founder Brand vs Business Brand
We love seeing you in Economic Times. Really. But guess what — customers don’t care about your newspaper photo, they care if your app opens in under 3 seconds. Paper Boat didn’t become a hit because its founder gave TED Talks; it became a hit because aam panna tasted like nani’s kitchen.
Lesson: Headlines don’t retain customers. Taste does.
5. Events: The Expo Black Hole
Ever been to Delhi Pragati Maidan expos? One founder spent ₹15 lakhs on a glossy stall with balloons, lights, and a dancing mascot. He came back with 500 business cards and zero orders. His competitor attended as a visitor, spent ₹2,000 on metro tickets and coffee, and cracked three supplier deals.
Lesson: Be a learner first, exhibitor later. Stalls don’t sell; hustle does.
6. Team Spend: The Rockstar COO Disaster
We still laugh (and cry) at this. A Bengaluru founder hired a “Star COO” from FMCG at ₹25 lakh salary in year one. The COO left in six months, calling the office “too scrappy.” The money went poof.
Lesson: Hire for hunger, not just CV shine. The right co-founder is not the one with Gucci shoes.
7. Cost Comprehension: Excel Never Lies
An agri-input startup once told us their per-unit cost was ₹20. After three months of audits, it turned out to be ₹38. Why? They forgot to count logistics, storage, and returns. Their Excel sheet was like a teenager’s Instagram bio: full of fiction.
Lesson: Numbers don’t kill startups. Fake numbers do.
8. Pricing: The Goldilocks Trap
One bio-input founder priced too low — “just ₹99, so farmers adopt fast.” They adopted, but the startup died because costs were ₹120. Another millet snack founder priced too high — ₹250 per pack. Farmers said, “Bhai, hum hi nahin kharidenge, toh kaun kharidega?”
Lesson: Be neither cheap nor snobbish. Be sustainable.
9. Discounts: The Sweet Poison
Ah, the 50% off forever model. Remember TinyOwl? They fed half of India for free until they collapsed under their own generosity. Discounts should be like salt in food — enough to taste, but not enough to kill.
Lesson: If your only moat is “cheaper than yesterday,” tomorrow you’ll drown.
10. Channels: Where Margins Go to Die
A snack startup sold at ₹100 retail. After distributor cuts, retailer margins, and GST, they got ₹42. They celebrated “₹1 crore sales,” but their bank account was emptier than their sample packets. Compare that to D2C players who sold directly online and kept 70% of every rupee.
Lesson: Channels are like relatives. Some bless you, some loot you. Choose wisely.
11. Net Realization: The Vanity Sales Trap
One agri-drone startup announced “₹1 crore turnover” on LinkedIn. After factoring in commissions, returns, and credits, their actual cash-in-bank was ₹18 lakhs. Basically, their “sales” were an April Fool’s joke stretched across 12 months.
Lesson: Count the rupee that lands in your pocket, not the one that dances in PowerPoints.
12. Customer Acquisition Costs: The Tuition Fee of Naïve Founders
We met a juice startup in Mumbai that spent ₹2,000 on ads to acquire customers who bought ₹500 worth of juice. They called it “early traction.” We called it “feeding customers from your own pocket.”
Lesson: CAC is not an investment if it’s higher than customer lifetime value. It’s charity. And you’re not Mother Teresa.
Closing Thought
Founder, don’t beat yourself up. Every startup has wasted rupees — some on expos, some on PR, some on influencers who only ate free food. But remember: the smartest founders don’t avoid mistakes; they avoid repeating them.
So next time, before you swipe the company card, ask: “Will this expense bring a customer, or just bring me applause?” If it’s the latter, save it for your wedding, not your startup.
With both affection and exasperation,
The Investor Community
Who’ve watched more money go up in smoke than Diwali crackers
