Should start-ups be funded by venture capital?
The recent rocky road for Facebook since it floated on the stock exchange in New York has highlighted a growing shift in how the business world views tech start-ups. The business community seems to have changed their approach to tech companies from instant attraction to being wary. The prices of current Facebook stock are not as high as some analysts have hoped for which has led some people to believe that the over-valuations from venture capital prepares tech start-ups to float on the stock exchange when they may not be viable businesses to do so.
Let’s look at the top reasons as to why tech start-ups should or shouldn’t be funded by venture capital.
- Venture capital funds risky ventures for bigger pay-offs: This is the whole concept of a venture capital fund and there is nothing more exciting for these capitalists than knowing that they can help to build a small start-up into a huge player like Facebook. The social network would never have received its start without financial help and the size of the social network meant that it needed venture capital. The cash that is used in this industry tends to be more than other loans such as instant loans.
- Start-ups need to be funded for innovation to happen: Technology lives and breathes on whether it can be innovative or not. Venture capitalists help start-ups who have disruptive technology and new ideas see the light of day.
- Venture capital can inflate the value of start-ups: Just because a venture capital firm has spent millions of dollars investing in a tech company does not mean that is what it is worth. Financial yardsticks like revenues and gross profit need to be used more in the tech start-up world because they show the financial health of a company more so than how much cash like online cash advances has been pumped into the company.
- Money from venture capital can put a lot of pressure on founders: The people who founded the company need to be ready for the high octane pressure that comes with venture capital money. This can be tough on founders because it means that the cash they apply for has to give a return to investors and stakeholders as soon as possible.
Tech start-ups need venture capital because it is a vital lifeline to receive the necessary funds to build a business, in the same way that a borrower who needs online cash advances.
Latest posts by Harkunwar (see all)
- Samsung Galaxy S4 Benchmarks [Exynos 5 Octa Version] - 1 January 1970
- Ubuntu For Phone Launched – New OS Entry in Smart Phone Market - 1 January 1970
- Ways to Purchase Nexus 4 in India ? - 1 January 1970