By Mark Sheffield, Principal
The marketplace for funding start-ups and ramp-up companies has been disrupted. Here’s what we see and hear on the street today:
- Capital is now abundant and cheap. Capital is everywhere. Many VCs in the past invested a minimum of $5 million and a maximum of $50 million. Now those same VCs will invest as little as $100,000 to as much as $100 million. Clayton Christensen (well-known business consultant, professor, author, etc.) says that capital is abundant, but opportunity is scarce, so the overall return on capital for investors is close to zero. It’s a great time for founders and entrepreneurs to start or grow a company.
- In this environment you can be more selective. Try to take “smart money” from investors who bring more than just money, and not “dumb money” from investors who can’t help you with your business.
- Make your pitch first to investors less likely to fund your company. That will give you practice and feedback. Then make your pitch to investors who know your market and understand your product, the smart investors who will be more likely to invest.
Raise money when you can. It’s an exciting time to be alive in the emerging business world.