Companies die of indigestion than starvation!!!

Well, this is in continuation to my previous post https://www.dhirubhai.net/pulse/change-course-mukundaraman-v/?trackingId=%2B42R2pUIUVsnqQ%2B1YoiM4A%3D%3D where Mr. Ram Shivakumar of Chicagobooth gives insights to 2 key questions on raising capital.

1. What kind of capital
2. How much capital

What kind of capital?

The author prefers the VC way as the startups are unable to generate positive cash flow, have a high probability of failure, goes through a phase of illiquidity but there is a risk of sharing decision-making rights with the VCs

How much capital?

The author refers to the following 2 schools of thought from the industry experts. How much ever we raise, the key should be to acquire user base and increase market share.

• Raising adequate capital - Adequate capital to reach the key milestones for the next target and the story continues henceforth. Achieving these milestones provides better valuation in the subsequent rounds. There is a reference to this famous quote where Mr. Packard says

More companies die of indigestion than starvtion

I do plan to write an article from a product standpoint where products do die of both indigestion and starvation.

• Raising as much capital - Acts as a signal to financial markets that the company has increased its market share, profitability, etc. I would personally disagree in the current context, it may not only be a signal of increased financial scores but various other attributes and biases playing a role here. I see a lot of fundraising happening across the globe on a daily basis. I sense that the ecosystem is a bit inflated, with a lot of excess funds flowing into the system to diversify risk, hyped market,

I am nowhere near to entrepreneurship but these are interesting videos asking profound questions, discussing great ideologies, principles, kindles my interest and my thought process in entrepreneurship. Lots to learn!!!!

Source:

Some of the books referred to in the article

Thanks & Regards

Mk