Friday 18 February 2011
Bootstrap your start-up to success - without venture capital
Is being able to rely on piles of money the key to success for a startup business? Dileep Rao, a professor at the University of Minnesota Carlson School of Management, in Minneapolis, sought the answer by interviewing 28 Minnesota entrepreneurs who had built their start-ups into organisations generating more than US $100 million each in annual sales.
Is venture capital necessary?
Conventional wisdom holds that entrepreneurs need venture capital to succeed, but one of the surprising things Rao discovered was that few of his 28 entrepreneurs relied on it, including the founders of the medical technology company Medtronic and the electronics retailer Best Buy. None started with such funding, and only six turned to venture capital to fund their growth. Only two of the six who took venture capital were able to retain control of their companies, something that most venture capitalists demand in exchange for funding.
“I think the old myths need to be re-examined,” Rao says. “Sometimes venture capital is necessary, but it’s not an either/or equation.”
He warns that venture capital companies won’t necessarily turn an idea into a success, no matter how unique or innovative it might be. He adds that as many as 32 percent of venture capital funded enterprises fail, and only 12 percent get to a public stock offering.
This extract was taken from an article by John R Platt on the IEEE website. Click here to read the full article.
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