Friday, June 26, 2009

Venture Capital - Blessing, or Curse?

Here's an interesting article from a researcher who also founded two different tech firms. He argues that, in certain industries, getting venture capital funding for startup firms isn't all that it's cracked up to be. Even if the funding helps a business achieve its self-identified funding goal, there's pressure inherent in receiving the money - pressure to hire an A-list (and expensive) staff, and pressure to produce *right now* (in lieu of pursuing long-term growth).

He argues that there's virtue in being undercapitalized, in that it forces a company's management team to be that much more creative (and honest) in what it needs to kick-start growth.

I cite this article because, as I've written recently, we've seen a bump in the number of requests seeking venture capital firms for our clients. There are certainly merits in seeking out this type of financing. However, obvious as it might sound, have your clients be careful what they wish for.

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