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Why Venture Capital isn't Everyone's Cup of Tea 85% of today's most successful companies were funded by the modern venture capital ecosystem but success also depends largely on knowing when to say 'yes' or 'no'

By Pooja Agarwal

Opinions expressed by Entrepreneur contributors are their own.

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Anyone who's a part of the tech start-up community has at some point in time toyed with the idea of receiving VC investment. Venture Capital is behind the success of almost every tech giant and these over the due course of time have become an indispensable part of our daily lives. Uber, Facebook, Apple, Paypal, and a hundred other companies minting millions today could do this only because a VC believed in their idea as much as they did.

"How do I get a VC to fund my start-up?" is officially the most asked question in the start-up community in almost every part of the world. What makes it a common notion that securing funding is the first step towards success? A highly overlooked fact is that almost every company with a billion dollar valuation already had it in them what is needed to be successful and it was rather the venture capital firm who cashed on their talent.

Fitting In vs. Standing Out

As much as venture capital is sought after, it is definitely not a precursor to the success of a company. Piyush Goyal, Deputy CEO, Lalaji24x7, strongly believes capital in the early stages of a start-up is a distraction which can turn great ideas into mediocre attempts of "fitting in'. He says "It's important to understand that venture capital exists because of the creative entrepreneurs out there who were capable of utilizing the funds. A lot of focused and talented entrepreneurs lose sight of their goals when they are distracted by possibilities that venture capital might bring."

Working at the core of an e-commerce grocery start-up competing with the likes of Grofers and BigBasket, Goyal understands the implications of wishing for and accepting funding. "Founders, fuelled by impulse, make decisions to impress investors thinking of it as a long-term solution but the only strategy to survive in the long run is consistent and impeccable service to customers in every possible manner."

Gauging the Commitment That VC Demands

You love your company and you'd want the best for it, always, even if it means convincing yourself and the investors that it will one day go public, and if not, then you promise you'll sell it in the blink of an eye for your investors to benefit from it. For most companies, VC is sadly an exit strategy. There's no turning back.

Mohit Sood, co-founder, Pwave Technologies, says, "For a VC firm, it is not about hoping and wishing. If you can't scale up quickly, you might lose the company completely." The risks of allowing investment are very well reflected in the conditions put forward during such an agreement. "If you are not seeking rapid growth, opting for VC might just force you to do exactly that, throwing you off balance because your company might become too big to sustain itself."

Choosing Customers Over Investors

Romil Jain, Co-founder at Quest Global Technologies, comments on what he thinks is a better alternative for early-stage start-ups, "While there's nothing wrong in aspiring to be funded, it is important to give the investors a good reason to even notice you. The time spent securing a funding at an early stage can be better utilized by acquiring customers that can make you profitable and get you the right kind of publicity and attention."

"I discourage crunching numbers to meet the criteria of a venture capital firm while placing your business objectives at the back burner. Improvements based upon regular customer feedback should be the north-star of any business that is testing the product's acceptability in the market", says Alok Agrawal, co-founder Quest Global Technologies.

Unless you're finding a cure for cancer or building a rocket ship, you don't need funding to get yourself off the ground. What matters is how you sustain the momentum until you attract the right kind of investment partner that you can trust. If you find yourself at this junction, would you stay private indefinitely and skip funding or would you risk giving away the right to own your company and go for it? Before you choose, just remember that tech-enabled businesses do not come with a mandatory high capital requirement and you wouldn't regret turning down an investor if you feel it's not the right time.

Pooja Agarwal

Freelancer, Entrepreneur.com

Spends the day scouring updates on Technology, Social Media, and Startups for Entrepreneur India and reads books in the night. Also worked as Social Media Manager and Content Writer for over 25 brands across industries.

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