Business Opportunities Weblog found this article from the Seattle Post-Intelligencer on the fact that few companies actually receive their funding from venture capitalists:
In fact, a recent report from Babson College and the London School of Business concluded that fewer than one in 10,000 companies in the United States receive their initial funding from venture capital firms. The Global Entrepreneurship Monitor report also found that entrepreneurs provide 65 percent of their startup capital, with the rest of the funding typically coming from friends, family or co-workers.
"If self-funding by entrepreneurs and informal investments dried up, entrepreneurship would wither and die," the authors wrote.
"If self-funding by entrepreneurs and informal investments dried up, entrepreneurship would wither and die," the authors wrote.
This data supports the model of the Natural Enterprise developed by Dave Pollard, one that I have used and counselled its use for some start-ups. Dave advocates organic financing:
Natural Enterprise differs from traditional business (even traditional entrepreneurial business) in two critical ways:
- Where the traditional business develops its product, mass produces it, and then advertises to create demand for the product, Natural Enterprises start by identifying unmet customer needs, developing customized solutions, then delivering to the pre-qualified customers, and marketing virally.
- Where the traditional business has a hierarchical organization structure and common shares, with control of the business often wielded by corporations or people other than those who run it, Natural Enterprises are flat and unincorporated, controlled equally by their members.
Is this the real form of capitalism, especially for Internet-based and small businesses?
