Entrepreneurs Going Without VC Funding
from the who-needs-VCs? dept
About a year ago, I went to one of these “panel discussions” that are so popular in Silicon Valley about “successful startups in a downturn”, and all the panel could focus on was how companies could raise money. To me, that was missing the point. Part of the problem during the boom years was that startups were looking at venture capital as if it were revenue. The more VC money you raised, the more successful people thought you were… when, in reality, it often meant you just had a bigger hole to climb out of. As someone who started (and continues to build) a company that believes very strongly in bootstrapping, and building a successful company based on actual revenue from happy customers, I’m drawn to other companies that do so as well. The San Jose Mercury News has just discovered that there are tons of these startups out there. Some of them are being started by people who realize the “downsides” to raising venture capital: the amount of time and attention that has to go towards raising money as opposed to building or selling the product, the loss of control, the pressure to grow at insane rates, among other things. Others are being started by long time entrepreneurs who simply want to keep the whole pie for themselves. What the article is missing (and a fact that is often forgotten) is that not all companies are right for venture capital. Venture funds make sense for companies where a large capital expenditure is needed up front to get things going, and where there’s a possibliity of an insanely large market opening up. It doesn’t make sense for a stable, cash-flow positive business that is going to grow at a steady rate. While some VCs snicker at the idea of a company becoming successful without any venture capital, they’re missing the point too. There are different kinds of business, that require different growth and capital strategies. Knowing what kind your business is in, is a huge part of building a successful company.