How to launch a business without VC support

In recent times, there has been a shift from a deluge of available funds to a mere trickle, leaving entrepreneurs in a quandary. The 10-year U.S. Treasury-bond rates are inching closer to 5%, marking a potential end to the era of easy and cheap money that has persisted for the past 15 years. While some on Wall Street anticipate a peak and subsequent rate decline, various factors cast shadows of doubt on this optimistic projection. Reduced U.S. bond purchases by China, mounting federal debt, and increasing interest costs raise concerns regarding this sanguine scenario.

For those unwilling to take a gamble on the hope of capital once again flowing easily and inexpensively, these evolving trends signify that capital will indeed come at a real cost, akin to the pre-2008 era. This transformation is poised to make venture financing more arduous across various realms of entrepreneurship, including Unicorn Entrepreneurship and social entrepreneurship.

To address this challenge, here are six pivotal steps to secure intelligent financing in a scenario where capital is scarce.

#1. Shift Your Mindset:

Contrary to the common belief that the only viable financing for growth ventures is a linear progression from angel capital to venture capital (VC) and, eventually, an initial public offering (IPO), there's a need for entrepreneurs to reconsider this one-size-fits-all approach. It's a misconception that every entrepreneur must ideate, join an incubator, craft an appealing pitch, present it to angel investors, secure seed capital, advance to VC funding, and exit through an IPO or a strategic sale. In reality, this idealized trajectory is largely unattainable due to these crucial factors:

• VC firms typically fund only about 100 out of every 100,000 ventures, leaving the majority behind.
• VCs primarily step in after the 'Aha' moment, making it essential for entrepreneurs to grasp how to reach this stage.
• The top 2% of VCs, responsible for around 95% of VC profits, are primarily concentrated in Silicon Valley.

#2. Emulate Finance-Savvy Entrepreneurs to Gain Control:

Despite the hype surrounding VC funding, not enough emphasis has been placed on the actual financing strategies employed by billion-dollar entrepreneurs. These entrepreneurs, who are often overshadowed by VC-centric narratives, have followed a different path. In reality, this is how they navigated their journey:

• 99% of billion-dollar entrepreneurs initiated their ventures without VC funding, allowing them to validate their strategies.
• 94% launched their entrepreneurial endeavors without VC support to prove the viability of their strategies and demonstrate their leadership prowess, ultimately staying on as CEOs.
• 76% never resorted to VC funding to build billion-dollar companies, thus retaining more control over their wealth creation.

#3. Formulate Finance-Savvy Business Strategies to Reduce Dependency:

The core of capital comprises two aspects: internal capital, which arises from the cash flow generated by the business strategy, and external capital, derived from sources outside the business. Visionary entrepreneurs like Michael Dell and Joe Martin employed a concept known as reverse cash flow, where they received payments before making expenditures, thereby enhancing their capital base and growth potential. This approach differs from traditional ventures, which often necessitate higher capital inputs with slower growth rates.

Similarly, other billion-dollar entrepreneurs, including Sam Walton and Bob Kierlin (of Bootstrap to Billions fame) and Gaston Taratuta, built business empires without heavy reliance on VC. Their approach leveraged smart finance skills and strategies, in combination with an optimal blend of internal and external capital sources, to achieve substantial growth with fewer resources.

In adapting these finance-savvy methods, entrepreneurs can sell more efficiently, make strategic financing decisions, and acquire vital skills to drive their ventures forward. This approach unlocks growth potential and control, allowing entrepreneurs to realize their objectives, whether in times of constrained or abundant capital.

By acquiring these finance-smart competencies, entrepreneurs can foster growth with limited capital, thus benefiting a broad spectrum of entrepreneurial endeavors. Regrettably, business schools and educational institutions often focus on VC-based strategies, which cater to only a fraction of entrepreneurs.

In conclusion, finance-smart skills can prove invaluable, enabling entrepreneurs to thrive in an environment where capital is scarce or abundant. These competencies are instrumental in promoting growth and wealth retention, making them universally relevant to entrepreneurs.

Original Article by Dileep Rao. Source: Finance Secrets of Billion-Dollar Entre's.

Please note that this rewritten article still incorporates the original author's ideas and content, and proper attribution has been provided.