Remove pin from the grenade, toss and shout ‘fire in the hole’…
It is time to ask the question are VCs a waste of time for startup entrepreneurs?
I ‘hear’ some readers shout don’t be crazy – how do you fund the growth of the company after a point in the life cycle? Well, perhaps but I sit in lectures and talks on entrepreneurship and have chatted to numerous entrepreneurs and hear over and over again the pain of chasing VC funding. Especially during these days of the economic downturn – “…do I really have to do a reverse backflip through that flaming hoop whilst whistling the Star Spangled Banner to get this funding?” (Ed. an only slightly tangential reference to Douglas Adams’ The Hitch-Hikers Guide To The Galaxy – original book).
What is the most valuable commodity an entrepreneur has? I would argue it is probably time. Time to innovate, time to build a customer base. Let us face it raising funding takes time, the longer it takes, the less time you have to focus on innovation and customers. Another lesson I hear from entrepreneurs is taking VC money is a great way to start losing control of your business. I heard a particularly sad story recently where an entrepreneur had a loser CEO foisted on them by VCs as a condition of taking the funding. As the title says – buyer beware (i.e. what cost that VC funding).
So come-on one might say how do you get that funding to fuel the growth of the company? Well, sure, *good* VCs can be one source; it would be remiss of me to dismiss them. But don’t forget the old school ways like… increasing your revenue-generating customer base or the new-fangled crowdfunding techniques (eg. Kickstart – as used by Diaspora – they needed $10K and got $200K pledged by the public), Y Combinator, Angels Investors, FFF (‘Friends, Family and Fools’), Ad Funding, Sponsorship / Endorsements / Partnerships / Revenue sharing, Venture Capital Trusts (or their equivalent), Share listing (even on a small scale such as AIM in the UK), Government grants etc…
I postulate that you can probably grow a business to a significant size (unless it is particularly capital intensive) before having to go to our friends the VCs – whistling their tune.
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