Funding Startups More Efficiently

The startup economy has boomed over the last decade, with one of the major factors being the loose monetary policy of the previous decade. As the cost of capital continues to rise, VCs are discussing the funding of "real businesses," and LPs are unlikely to continue accepting unicorn success rates of 1 in 10,000. (Note: this was written in 2023, and large PE outflows have already begun.)

So, how can we improve startup success rates?

In Singapore, grants are available to first-time founders through the Startup SG Founder Grant, which is a great initiative. However, I've always believed that repeat founders should also receive grants, as statistically, they have higher success rates than first-time founders. Grant recipients should open source their learnings, allowing others to learn from their mistakes and build upon their successes. It makes no sense to fund endeavors that keep tripping over the same blocks. Many startups have failed, banging against the same walls.

Funding is often headline-grabbing and the most visible measure of success. But is it time to change that narrative? Funding is merely a measure of what a startup receives. Success should be measured by what they give. (In the first paragraph, I alluded to unicorns being a "success". I'm trying to resist that narrative in my own head.) If not funding, what other parameters could be used to measure success? Job creation, problem-solving, positive societal impact, revenue, or EBITA?

Is the nature of startup ecosystems with disruptive business models about enduring high failure rates or an issue of inefficient resource allocation? Probably a mixture of both. (side rant: 'spray and pray' methods of investing is just a huge wastage of resources.)

What parameters can be used to track startups' success?