Reasons Why VC Funding May Not Be Better For A Business

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You will need a steady flow of cash and at the same time manage your finance well to run your business well. You may even have to look at different other sources for funding your business if you get stuck and the bills receivable are less than your bills payable. In such a sticky situation you may take on any and every available loans, funds and grant that may provide the desired relief from the stiff financial condition but rest assured it will be short lived.

Thoughtless and careless borrowing will lead you and your business into further troubles in the long run. It is for this reason you have to tarry a little, put some thought in your business funding process and do a lot of research.

Ideally, most business owners think that VC funding is the best option in such situations but practically this may not prove to be a good choice ultimately even though lifestyle business may appeal to you just as it does to several other entrepreneurs.

New venture creation

New venture creation must have a compelling plan and a clear and feasible VCbankable concept. Over the past decade venture capital-backed startups have made a remarkable impact and resulted in a massive tech boom and there are three distinct reasons for that shift:

  • Startup lessons: These lessons tend to relate across the board. This action-based learning exercise helps in proper mapping out, consistent reporting and better reentering of the workforce with its applicability to all types of frameworks whether it is entrepreneurial or otherwise.
  • Low tech business appeal: There are many people who find the low-tech businesses to be more appealing. This is due to the fact that low-tech businesses hardly represent stimulating investments to VCs due to its low valuation multiples which is a result of the restricted growth upwards.
  • VC financing: There are a very small proportion of startups that raise VC financing even if they are quite successful. According to the 2017 report of the US Census Bureau, there is only about 18% of such application and according to Venture Monitor data and the National Venture Capital Association in the same period saw “first financings” from VCs as contrasting to follow-on financings was less than one-half of 1% for new businesses.

All these facts and figures and the modern trend in business funding shows that the first financings from VCs now granted will incline to occur one to three years after a business is first incorporated. However, irrespective of this fact the statistics of the year-to-year funding is much similar enough and does not tend to change its proportionality significantly and in a meaningful way.

The growing appreciation

There has been a steadily growing appreciation for non-VC-bankable startups over the years. It is surprising and highly intriguing to see how businesses now represent a sincerely appealing path for several different entrepreneurs. This is primarily due to the positive sides of the so-called lifestyle businesses:

  • Ownership and control: If you raise equity financing from VCs or even from liberty lending USA for that matter for your business it will come with its own downsides. These disadvantages are rarely talked about but it can have a serious effect on the ownership and control of your business. There will be a constant pressure on you to achieve a liquidity event such as a sale of an IPO or the company within a fairly short time horizon of about three to six years. Typically, if you want to go public your company must have pretty massive needs and if you do not raise equity financing you will have far better control of your business and your own destiny. Moreover, if your business is in a reasonably protected niche then you do have the luxury of time to grow it at a more leisurely pace. It is all up to you as to whether or not you want a board of directors or an advisory board and also who are the people you will like to invite to join.
  • Less dependency: If there is less dependency on funding there will be greater chances of success of your business. On your one hand, you will have to fund your business through your savings, or credit cards, or bank lines of credit, or loans from a friend or family, or small business loans and other different sources. On the other hand, it may seem to be very lucrative and appealing to load up on lots of funds from the VCs for your startup. But as discussed earlier, this business funding path will mean that you will be one of those selected few who are successful in enticing VC investments. Of course, it will come with outside pressure to either go big or go home and eventually sell the company. Therefore, in general, you may think that a well-crafted lifestyle business has lower upside but at the same time, it has a lower risk that will enable you to be airborne soon and provide you with higher chances to achieve at least some level of success.
  • More options: You will have more options in life if you own and control your business because you will be able to decide the degree to which you want to grow your business and whether it will be an aggressive path taken to maximize the cash flow or wealth or you want to take a more casual approach. Such decisions will enable you to build your business on a specific and smooth plateau and then all you have to do is simply and properly manage it so that you have enough free cash flow that will help you to work out an option. the most important fact and benefit of building a lifestyle business in this fashion is that it by no means precludes selling the company eventually if you choose or as an alternative hand it down to your child someday.

Lastly, lifestyle businesses may be low tech in nature but you will still be able to leverage technology for your benefit.