The business model for tech startups can be rough, especially if your goal is to grow into a global concern. Venture capital investment becoming the norm for the industry during the late 1990s and early 2000s meant that sooner or later, the process of finding the right funds for each stage in your company’s growth would become its own area of expertise. Love it or leave it, that’s where the industry rests as it moves into the 2020s, and you really can’t expect to land a good investor or build a network of smaller sponsors who can help you cross the finish line if you don’t have someone with the expertise needed to break down the idea and sell it to them. That’s why so many new companies are making the recruitment of a finance and funding guru the center of their efforts to grow.
A Legacy of Specialization
There isn’t a lot of agreement about how VC became the norm for technology startups. Some people believe it’s the natural result of early tech companies blowing up so much in the stock market that the beneficiaries of those windfalls moved into financing other great ideas. Others point out that there was a large contingent out of those early tech companies who depended on angel investment even if they didn’t use that term for it. Probably the most famous example of a financial mastermind being the make or break influence on a corporation is Apple computers. While Steve Jobs was the design visionary who brought the company’s revolutionary tech products to market, it was Mike Markkula who provided the initial angel investment that allowed the company to grow, and it was his managerial guidance that led to its establishment as a global powerhouse. Mr. Markkula not only served as a high profile early investor, he also brought in other investors as needed and helped communicate with shareholders.
Diversification in Funding Sources
Today, the traditional angel investor model of raising capital is just one of many that are used by the industry when a company needs the reach to grow quickly. In addition to large, single-donor investments that are brought in as needed, you can now adopt strategies that widen your range of tools and reduce the risk that a single investor might gain too much influence over your day to day operations.
- Peer to peer financing brings large groups of small lenders or investors together
- Mezzanine arrangements use a combination of debt and sponsorship to control the dilution of your interest
- VC pitches for subsequent funding rounds
Each approach requires a different way of presenting the pitch for your business, as well as a different set of commitments to the people providing the financing. Sometimes, an angel investor simply isn’t right for the current phase of your business, and when you work with someone who understands the funding infrastructure that tech companies rely upon, you get better targeted advice about those financial strategies.
Recruiting Your Financial Mastermind
So how do you find the right person to wrangle a pile of working capital into your company coffers? Start by looking at the people who have successfully started other companies. Even if someone didn’t start as a funding specialist, if they have repeated experience landing VC investments, they eventually become one. You can find out a lot about someone’s track record from professional social media because it’s common to talk up your accomplishments, but you can also learn a lot from independent resources like Pitchbook who profile VC professionals and their past projects. You might even consider making a pitch to a VC investor to be your initial seed money and also to come on board as the financial mastermind who recruits the rest of the investors you need to expand rapidly into an international powerhouse. Experienced pros like Matthew Ocko have a track record of both financial leadership and investment prowess, and they can probably help you find your best path forward in today’s marketplace.
Alternatives To Venture Capital
Remember, VC funding is meant to help companies undergo the transformation from small operations to international leaders. That means it’s not appropriate to all businesses all the time, even if those businesses are startups. You can find other financing if your company is not yet poised for the kind of pressures that an angel investor would put on the operation. In fact, your eventual goal of finding the venture capital you need to blow up into a global powerhouse will be more likely to work out if you focus on other methods of raising capital until you’re ready to make the leap into rapid expansion. There’s nothing that says a company must start in that phase, and for some businesses, starting a small but profitable operation could be the proof of concept needed to hook an investor and sell them on the idea that it could be a much bigger, more universal product or service.