For any founder sources of capital are hard enough to come by as it is. Venture Capital is the most common and resourceful means of getting it. But what about the founders who dry up the well looking for the precious piece of gold that will lead them to bountiful success. There must be other means of reaching the holy grail of capital goals.
In an article done by TechCrunch Clearco co-founder and president Michele Romanow, and Pipe co-founder and co-CEO Harry Hurst. In the article, they sit down to discuss the various methods that firms can acquire funding and which would be the greatest channel for entrepreneurs.
However, Romanow and Hurst offered up that capital does not have to be “mutually exclusive.”
“I believe the largest companies in our portfolio are utilizing a variety of capital sources,” Romanow added. “I would advise you to conduct a study on what form of financing is appropriate for the stage of your business and the purpose for which it is being used. And I believe you’ll find that if you do that, you’ll end up being much less diluted at the end of the day. And you’ll find additional leverage over time, allowing you to scale much more quickly.”
According to Mathew, the majority of businesses are not a good fit for venture capital. “Venture investment is costly, and it comes with particular expectations depending on who you raise money from,” he said.
Romanow pointed out that whether a founder should seek venture capital or other forms of funding is primarily determined by their intended use of the funds. For example, if a firm needed money to buy inventory and advertising, venture financing would not be the ideal option. “It doesn’t make sense to give up significant equity at this level of the game to undertake something that’s a recurring and scalable expense with a fixed return,” Romanow said.
He explained that just because an investor rejects you once does not mean you should write them off permanently. Accel, according to Mathew, strives to be completely transparent with its feedback. “In fact, some of our best investments have come from saying to the creator, ‘No, not right now, but maybe later when you prove x, y, and z,’ and then revisiting,” he explained.
Misconceptions abound when it comes to venture capital and other alternative financing methods. One of the most common misconceptions about what Romanow’s organization does, according to her, is that it is the same as debt. “They possess your business if you don’t pay back your loan holders,” she warned. “So there’s a lot of risks there, and it’s late in the game.”
Original article done by TechCrunch: https://techcrunch.com/2021/10/03/why-and-when-startups-should-look-to-diverse-sources-of-capital/
