4 myths about venture capitalism debunked

It’s become synonymous with the business world and any company which is experiencing growth is usually the talk of being the next thing to be taken over by venture capitalists.

All of the talk about this form of investing has of course led to plenty of misinformation about the subject to be published, particularly online. This is something that Greg Lindae is fully aware of, having been involved professionally in the business for many a year.

For the purposes of today’s article, we have been able to tap into the knowledge of Lindae and debunk some of the biggest myths that are arising from the industry.

Myth #1 – Venture capitalists like to take control

While there will always be exceptions, generally venture capitalists don’t like to take full day-to-day control of a business they invest in.

Firstly, if it is clear that a business is on its last legs, there’s every chance that they won’t want to invest in it in the first place. Then, if it’s the other way round and the business is on the rise, they’ll know to leave things to the existing CEO who is clearly doing a good job.

Any venture capitalist that attempts to micromanage is going to be harming their own reputation. This isn’t what this form of investment is about.

Myth #2 – It’s just a cash injection, nothing else

Following on from the previous point, you still shouldn’t be under the illusion that a venture capitalist can just add cash and nothing else to a business. Sure, some might operate under this premise, but the general idea is that most are looking to add value to a business – not just money.

As we have already alluded to, this doesn’t revolve around interfering in day-to-day problems, but more the overall direction a company is moving in. If they have experience in the industry, it stands to reason that they are going to offer assistance.

Myth #3 – Venture capitalists are only interested in ideas

This next myth couldn’t be further from the truth. Sure, some investors will turn to that next “big idea”, but on the whole this is rarely the case. Instead, most are only starting to consider investing in a business when it starts to generate at least some revenue. Just because you have registered your company, it doesn’t mean to say that you are immediately eligible for investment.

Myth #4 – You only have to look for funding from investors

Even though your business might be appealing to investors, don’t be under the impression that you don’t have to raise any of the money yourself. In actual fact, those entrepreneurs who invest their own money in a business are regarded as being much more attractive to outside investors, as it shows that they have confidence in their company and are at least daring enough to take risks. Sure, it’s by no means a prerequisite, but don’t just look for investors to prop up your company if you have money in the bank yourself.