The definition of what constitutes a startup can change according to every person you ask. Some people cite the dictionary’s simple “a fledgling business”, others claim that the term refers to a new business (particularly tech) with the potential for rapid growth. It’s also been said that “Startup is a state of mind” and involves a particular culture of innovation.
So, at what point does a startup cease to be a startup? Is it purely the passing of time? The number of employees? TechCrunch writer Alex Wilhelm created a ‘50, 100, 500 rule’ to attempt to draw a line, but there’s no real consensus on when the startup label is no longer relevant. However, while it might be difficult to make a general cut-off point, individual businesses will be sure to know when they have surpassed the startup barrier and headed into the next phase of business.
Taking the next step
This next phase of business is rife with heavy decisions for yourself and the company. Priyanka Malik writes that the transition is usually filled with a series of strategic decisions. For example: decentralising operations and creating specific teams rather than the ‘everyone pitch in’ mentality that’s necessary in the early days. This goes hand in hand with creating a more hierarchical management structure.
Transitioning out of the early startup phase means looking for funding opportunities, and discerning which option suits your business. From crowdsourcing, to bootstrapping to angel investors, to venture capital… there are many different options.
Students on the Global Entrepreneurship Program spend a semester at Lubin School of Business at Pace University in NYC, where among other classes, they study Private Equity & Venture Capital Finance. As such, the students leave the program with the knowledge required to make important financial distinctions regarding their start-up projects.
A leading business school with AACSB accreditation, Lubin School of Business has 35 years of expertise in its entrepreneurship program, with particular recognition for its student-centered environment and outstanding facilities.
Why raise venture capital?
One option is to opt for VC funding; the immediate and obvious impact of which is that you’ll have more capital. Alex Iskold writes about the benefits in Entrepreneur: “Unlike angel investors, who typically write checks between $10,000 to $100,000, VCs can write multi-million dollar checks. This means that VCs support startup growth from seed to much later stages”.
Having a VC on board is also often “a rubber-stamp for credibility” according to Ryan Himmel. If you seek future rounds, or a strategic partner, being venture-backed will go in your favor. What’s more, according to David Roth in Forbes, “working with the right venture capital people can bring a synergy and balance to your board and deliver value to the table that is beyond the money”. The best VCs provide entrepreneurs with their expertise, knowledge and contacts.
Making a good impression: advice from Venture Capitalists
- Research, research, research. Greg Gottesman, Venture Partner at Madrona and blogger at StarkRavingVC states that entrepreneurs should do as much background research on prospective VCs as the VCs do on them. The VC needs to know why you have come to them specifically – not only does it convey confidence, but the VC can see if you’re both on the same page in what you can achieve.
- Get an introduction. David Hornick of August Capital writes about ‘borrowed credibility’ in Ventureblog, and the importance of a warm introduction. “In my 13 years in the venture business I have never once funded a company that hadn’t been introduced to me by someone I knew and trusted […] the founders were not resourceful enough to find a connection to me.”
- Prepare, and be brief. Jeffrey Bussgang, author of ‘Mastering the VC Game’ believes most VCs and angels make up their minds in the first 10 – 15 minutes. In a blog post referencing a recent presentation at Harvard Business School, he writes “if you can’t show good summarization skills, how will you handle a boardroom?”
- Recognize the process takes time, but always follow up. Brad Feld & Jason Mendelson, authors of the book Venture Deals, write the blog AsktheVC. They say that “successful fundraising is usually a series of small steps rather than one large step”. They also state that being gently persistent, and following up if you say you will, is important.
Taking your startup to the next stage can be a tricky process, but the rewards of successful entrepreneurship are evident. With VC funding you can progress further and reach your goals. After all, if a VC invests in your company, they believe in your business model, plan, projections and think that you’re onto something.