Ever since the the dot-com boom of the nineties, venture capital has been viewed as a prerequisite for the successful growth of technology start-ups. But new companies should -- and can afford to be -- leery of accepting venture funding.
There's no doubt that funding is the lifeblood of business growth, but entrepreneurs shouldn't forget that capital itself is useless without innovation, and sacrificing the precepts and long-term goals of your company is never worth short term growth. After all, there's no one-size-fits-all VC firm; the technology industry is simply too varied and specialized. While the current venture landscape for new tech start-ups isn't necessarily a seller's market, there's no longer the pressure to jump on the first VC or private equity firm that shows interest.
A recent article by Stephen Zarrilli in the Huffington Post argues that this new market should be seen as a welcome change for both investors and young companies. "Entrepreneurs and financiers can avoid the ritualistic mating dance and tire kicking that is preliminary due diligence, and more directly engage in the productive dialogue that occurs when there is an obvious fit between the firms. ... [Because of this,] deals tend to close at a much quicker pace than they do elsewhere." Finding a good investment fit is important because accepting funding blindly can lead to a loss of a control if your financial backing comes from a source that doesn't fully understand the idiosyncrasies of your specialty.
The savvy entrepreneur will regard venture capital as more than just seed money. It's the beginning of a relationship, and one that will dictate that path of your company. Valuation services are important tools for navigating the VC field, and knowing just how much your business is worth before entering into a conversation with a VC or private equity firm will ensure that you know as much about their field as they do yours.
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