“The default option for entrepreneurs should be to not raise money” – Mukund Mohan

October 1, 2013

http://bestengagingcommunities.com/2012/03/21/the-default-option-for-

entrepreneurs-should-be-to-not-raise-money/

There’s a very interesting piece by Felix Salmon on Wired that has some very interesting nuggets and takeaways for entrepreneurs. I am highlighting the most important parts, but the entire article is worth a read.

This goes back to my original thesis that the entrepreneurs should bootstrap as much as possible because only 16% of companies in the Inc. 500 list from 1997 – 2007 actually raised VC money (read the Wired piece). Rest were self funded. Out side of technology that number is lower.

Going public might be good for a company’s investors and employees, but it is usually bad for the company itself. It forces CEOs to focus on short-term stock fluctuations at the expense of long-term growth. It wrests control from the founders and gives it to thousands of faceless shareholders.

To put it another way, the VC model is based on creating wealth for investors, not on building successful businesses.

(2011) Last year 429 VC-backed companies were acquired, while 52 went public

In 2009 Paul Kedrosky, a Kauffman Foundation senior fellow and venture capitalist, looked at the Inc. 500 list of the fastest-growing companies in the US for every year between 1997 and 2007—a period that includes the VC boom of 1999-2000. He found about 900 companies in all, of which only 16 percent had VC backing.

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