Redefining VC Funding’s Role In Business Achievement

The rise of Silicon Valley as the epicenter of the technology industry has done more than champion the seemingly overnight success of tech unicorns like Facebook, Amazon, and Netflix; as the global hub of all things innovation, Silicon Valley has changed how the world views startups. Over the past several years, and possibly even decades, we’ve been conditioned to believe the typical startup narrative is:

  1. Launch a product
  2. Raise millions of dollars in venture capital funds
  3. Grow the business

And finally, after a few years of blood, sweat, tears, and toil, either sell the business or launch an IPO, making the ground floor founders incredibly wealthy in the process.

Sound familiar?

One key misconception in our interpretation of startup stories is the requirement of huge sums of money raised in several rounds of angel and venture capital funding. Yes, it’s fair to say that, no matter what the industry or vertical, many businesses do require external capital to grow and scale operations. However, the precept that external financing is mandatory can also prove dangerous, leading many to assume that generating outside investment is an absolute requirement (particularly in the tech vertical) for entrepreneurial success.

This is simply not true.

The truth is, several tech companies have built successful, sustainable businesses without raising any venture funding. MailChimp, Shutterstock, and Basecamp are all excellent examples of relevant corporations who never relied on outside funding. Additionally, there are countless smaller tech companies that may not be considered “unicorns” just yet, but are still autonomous value creators and industry influencers that offer financial security to founders. To optimize every possible corporate opportunity, we must reconsider the definition of success to also recognize these founders and their amazing accomplishments within their respective fields.

Adjusting The Lens Of Corporate Success

Eliminating external financing as the only success barometer proves particularly critical when considering who actually has direct access to funding…and who does not. There are those in our society – women, people of color, LGBTQ individuals, and others – that have historically had limited access to outside investment for their businesses, making it even more vital to not judge achievement and relevance by the amount of raised external capital.

Vanity Fair recently published a feature story in its magazine showcasing the 26 Black female founders who have received more than $1 million in venture funding. Their individual and collective achievements are rare. These women are true trailblazers and innovators who have more than earned their national recognition. However, while we should applaud these entrepreneurs, we must also watch that such acknowledgment doesn’t send a signal that only those who raise large sums are praiseworthy, especially when only a handful of underrepresented founders may have had access to the resources needed for this accomplishment to begin with. Getting a business “investor-ready” requires significant access to time, money, and talent – resources often unattainable for many entrepreneurs, particularly those from underrepresented backgrounds. The standard “friends and family” round that many companies go through in its early stages is simply not available to many founders who do not hail from wealthy families.

A business’ investor-ready status does not determine its importance. Further, in many cases, venture funding may even be detrimental to business owners. Venture capital firms often take a seat on the Board of companies they invest in, imposing restrictions and requirements that either don’t align with the founder’s vision or distract founders from what should be their primary focus: delivering maximum possible value to customers.

Leveling The Playing Field Of VC Funding

Still, venture funding should be more widely available and accessible to founders from all backgrounds. As entrepreneurs and consumers, we must all continue sowing the seeds of change to ensure everyone has a fair shot at receiving venture investment. Why? Because when innovators do raise large amounts, it’s not just a major achievement – it can also prove a very lifeline to companies in every industry and of every size and scope. But, we must also strive to equally recognize leaders that struggle every day to build their businesses through ingenuity, bootstrapping, and sheer force of will. They may not grow their businesses as quickly, or have their achievements hailed in globally prominent publications, but they offer immense societal and economical value in the form of job creation, innovation, and inspiration.

 

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