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Venture capital has become a buzzword for entrepreneurs worldwide, thanks to its ability to transform small-scale startups into billion-dollar companies. However, amidst the glamour and media attention, a lot of misconceptions and myths have evolved that wrongly indulge entrepreneurs into thinking various fallacies about the funding option. So, it’s time to break down the most common myths and sets the records straight.
VCs fund only tech startups.
While it’s true that venture capitalists traditionally invest in technology-focused startups like software companies or hardware inventors, it’s not a foolproof following rule. VCs are looking for startups that will potentially scale-up and offer significant returns on investments within three to ten years, irrespective of the industry the business operates in.
Getting VC funding guarantees business success.
In reality, receiving VC funding doesn’t assure your startup’s success. Startups that acquire venture capital money often face steep expectations from investors in terms of return amounts and growth rates. Also, entrepreneurs have noted instances where substantial funding has done more harm than help to a business by introducing unfavorable workplace cultures, super intense working environments, and barriers to company ownership.
VCs will make up for any deficits in strategy or team
Venture Capitalists focus primarily on companies with substantial growth potential and almost, always support entrepreneurs who build it. That means rather than fixing what’s missing, VCs often venture on an early-stage startup that comprises key factors right from the start, such as a strong market potential and a reliable team with unique expertise. Be sure to bring your strongest strategies and the right networks while seeking VC funding.
VCs want businesses without existing revenue or profits.
This statement is partially correct as VCs love unique ideas, however in some cases, typically, the VCs would want the company to be cash-flow positive, highlighting that the startup made profits via earnings relative to the quantity of cash incited in hand before investment can be made financially reasonable.
VCs almost always interfere with the running of a business
Pledges offered to venture capital investors commonly consist of guarantees over strategic planning executions and forecasting issues as they played a considerable role in customer delivery models for startups. However, getting the VCs pledge doesn’t suggest they prevail on ‘’sitting-down rules’’ if practiced efficiently. Venture capitalists understand their limits and are eager to see startups grow and thrive in preferred, functioning strategic criteria.
In conclusion, acquiring VC funding would pretty much drape your startup with unique prestige, media coverage and offer exposure to dynamic surroundings, but before deciding to fundraise through this funding option, ensure that your unique selling proposition requires the benefit of VC provided growth strategies and harmony partnered with prior startups before adventuring down this route. Remember, stereotypes shouldn’t be criteria, but several reminders to intensify your facilitation.
