startup-costs, investment, venture-capital, seedThis is my first question - a very trivial one I think. Recently, I was reading up a bit on startups. I’d be glad if someone could clarify the main purpose of investing in a startup i.e. what does the VC money, seed investing money actually help the startup with?
From Marc Andreessen’s blog:
You’ll notice that a lot of what you may need to do is kick the ball further down the road — make more progress against your plan before you raise venture capital. This obviously raises the issue of how you’re supposed to do that before you’ve raised money.
Why is it that a startup cannot make progress without any venture capital? Is it because the founders who are working on the product will not get paid otherwise? Are there any other reasons?
Also, I’d really appreciate it if someone could link me to a website that has a lot of startup and business info!
Meh, this is a quote from Marc Andreessen who is running a VC firm. Would you seriously expect him to tell you that he should not get a piece from your cake? :-)
(Quick life tip in passing: learn about who is saying what you’re reading and what’s in it for them; especially when it sounds weird or counter-intuitive.)
On a more serious note, raise money if you tick most of these boxes:
The key thing to keep in mind is that the VC will be looking at their ROI. If you bootstrap, the only thing that counts is break even and making a larger profit from that point forward - however slow or fast. If you’re VC-funded, there’s a rather strong pressure to spend the money you’ve raised in order to create a business that is larger than you may want it to be, faster than you want to get there, because your investors are in it for the ROI. It’s a hard problem because it’s a recipe to build organizational debt. (that’s a link to a good blog, too.)
Another simple answer is, why not play with the house money rather than your own? If you can find investors who are willing to fund your business and take on the risk of it not succeeding instead of using your own money, why wouldn’t you?
Another issue is that most entrepreneurs don’t have the money themselves to fully realize their projects, because launching a business is far more expensive than most people realize. Finding venture or angel capital is almost a requirement for many startup businesses.
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