Implications of the first funding round

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Raising capital is a momentous occasion for any company. As a venture capitalist, it’s a hard thing to admit, but we really are an entrepreneur’s last option for capital. By the time they reach our door, they have typically tried at least three other sources of capital:

  • Born rich, they have evaluated using family money
  • They have tried to convince a bank to lend them money – which is always cheaper than equity
  • They have friends who are willing to fund them to the Promised Land.
If none of these are an option, only then do they turn to venture capital.

Needles and haystacks
Entrepreneurs think differently. They have opted to see a world that no one else currently sees. They need resources to recognise their vision: some will be employees and work in the company to build, and others will be investors and provide capital.

The process of finding both of these groups of people who align with this alternate view of the future, is like finding a needle in a haystack. So it is no surprise that this process is challenging. But having developed the conviction to see their vision come to fruition, they now have no choice but to begin the search and sales process.

And then there were two
At the start of the company there is a singular vision driven by, usually, a single person. Alignment is relatively easy. Once you realise that you need to bring others together to realise your vision, the act of aligning an ever-evolving strategy gets harder and harder.

This is an excerpt from Tech in Asia. You can read the full article here.

Sandeep Murthy is Partner at Lightbox VC. He moved from US to Mumbai in 2005 to lead Sherpalo Ventures in India. As a Partner with Sherpalo, he has been a part of two Indian technology unicorns  – InfoEdge and InMobi  with a third (GreenDust) on the way.

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