Although there are many reasons for new businesses to seek start up venture capital funding, there might also be many other reasons why some businesses might want to avoid it. Venture capital financing is basically funding provided by a certain venture capital firms to help new businesses start out their operations.
Venture capital funding is just one of the various options that businesses and start ups may consider when trying to come up with the necessary capital. Although such options provide a great means for a new business to have the opportunity of starting out the right way, there are reasons that may hinder some start ups from seeking such funding for their new company.
One of the reasons why some start ups avoid seeking venture capital is not just because it may be pretty difficult to get at times, but it can also be a source of distraction over the other important things in the business. Some entrepreneurs can get so into getting additional venture capital for their businesses that it becomes the primary means to let the business survive.
Sometimes it can take the place of actual entrepreneurial tasks such as selling products are providing services that customers actually want. Such ways may help keep the business going, but it seems to postpone final test phase to see whether a certain business idea would really survive in the marketplace.
Another thing why some businesses may avoid seeking venture capital is that many firms that usually provide the funding may not be always on the consistent side when it comes to supporting businesses. A lot of venture capitalists usually go for what is currently the best out there. They sink their money into something that may prove to be the trend in today’s market.
Whatever is hot right now, that is where most venture capitalists seek to put their money in. A lot of other business ideas may not be given the same attention no matter how attractive they may be. Some entrepreneurs get concerned that venture capitalists may leave them by the wayside at some point when the industry they are in no longer becomes part of the hot trend in investments.
Other start ups never bother with seeking venture capital funding because it can do a level of damage to businesses in many ways. For one, some venture capitalists seek out to gain more from their investments by trying to get the best discounts and concessions from the companies that are in dire need of their help. When most venture capitalists know that a certain business is in dire straits and would immediately bee seeking aid, most of them would resort to stalling and putting companies in the brink of failing just so to extract additional concessions at the last moment for their own benefit.
Not only that, there are venture capitalists who expect to exert a certain level of control over the companies that they have provided some venture capital funding into. Sometimes, this can get way out of hand that the actual business owners may no longer have personal control over the company. It can sometimes go the way of the venture capitalists running the company themselves.
It may defeat the purposes as to why some entrepreneurs went into the business in the first place. The business that they dreamed to nurture and grow over time can sometimes be taken away from them by venture capitalists.