3.5: Note on Financing Strategies: Issues to Ponder as the Money Is Being Raised

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Abstract

Few, if any, start-ups survive to maturity on the basis of a single round of financing. It is in the nature of the venture capital beast that companies consume cash in their early stages at unforeseen, sometimes alarming rates. Not only must products be developed but, in the classic venture capital scenario, a new market must be penetrated and, indeed, sometimes created. Digital computers, xerography, express mail-these were not products developed to satisfy the public perception of existing demand. Rather, the existence of the product created, uncovered if one prefers, the demand; necessity was not the mother of invention. Today it is difficult to see how humanity could get along without these staples. Nonetheless, no customers' queue awaited computers until the computer was introduced and created the queue in the first instance. Accordingly, the need of a start-up for frequent and regular infusions of cash is an