Of all the various aspects of startups, that of entrepreneurs and money is probably the most sensitive. How much personal savings should a founder invest in a high-risk venture? Should she raise venture capital? Will taking money from friends and family backfire? To address these concerns, I gave a talk in 2012 at the Entrepreneurship Development Center, NCL Innovation Park, Pune. I focused on the options available to early-stage tech startups in India and the lessons learned from similar ventures in the US.Tech-Startup-Funding-Options
It turns out that, for startups working in biological, chemical, and material sciences, the best source of risk capital remains the government. Angels and VCs are better suited for later funding rounds or software/IT startups.
Obviously, venture capital is not for everyone – despite what we read in popular media. Professional money comes with its own constraints in the form of milestones, stringent terms, and expectations of quick/large exits. Moreover, the degree of control exerted by venture investors can suffocate entrepreneurs who crave independence. Similarly, angel investors too can limit the strategic flexibility of founders by getting overly involved in startup operations.
In fact, well-meaning family and friends may combine their money with unsolicited advice on product development, sales, hiring, and other crucial aspects of a new venture. Thus, entrepreneurs and money can end up being oil and water, instead of fish and water. Founders may realize, too late, that they would have been better off bootstrapping their ventures instead of raising external funds. Nevertheless, billions of dollars continue to be poured into high-tech, high-risk startups globally, including India. The Indian venture ecosystem is far less mature than that of the US. Yet, there remain high aspirations amongst entrepreneurs and investors. Many believe that the spectacular success of Indian immigrants in Silicon Valley can be recreated in Bangalore too!