Access to capital is important for all firms, but it's particularly vital for startups and young firms, which often lack a sufficient stream of earnings to increase employment and internally finance capital spending.
Sentiment: POSITIVE
Accessing capital to start a business can be a daunting process, especially for entrepreneurs who start out with a great idea, but have no real familiarity with the business world.
Too many startups get in the habit of continually raising more and more money, which has the deleterious effect of both pushing out profitability and limiting your exit options. The less rounds of capital you need to raise, the more of your company you get to own.
In my experience, there are only two valid reasons to take a company public: access to growth capital and investor fatigue.
I would say raising capital is one of the weakest things for most entrepreneurs.
Many entrepreneurs have shifted their focus to pursuing VC funding as a primary strategic priority instead of concentrating on generating value for their users. This is worrisome because raising capital alone is misleading as a benchmark for success.
One of the most important aspects that feed a thriving economy is successful businesses, so the more startups that take off, the better the financial picture is for everyone.
Our experience is that most entrepreneurs are able to attract debt, even for risky and early stage investments. There are investors who provide debt, but very few who fund through equity.
Finance is critical. If sufficient investment is made in infrastructure and venture capital is made available, there will be a big improvement in the situation.
There's nothing wrong with raising venture capital. Many lean startups are ambitious and are able to deploy large amounts of capital. What differentiates them is their disciplined approach to determining when to spend money: after the fundamental elements of the business model have been empirically validated.
The financial doctrines so zealously followed by American companies might help optimize capital when it is scarce. But capital is abundant. If we are to see our economy really grow, we need to encourage migratory capital to become productive capital - capital invested for the long-term in empowering innovations.