Startup Landscape in CA: Changing or More of the Same?
Working with startups in Silicon Valley has never been more exciting, vibrant and stimulating. For entrepreneurs, it has never been cheaper or faster to get funded. Startup CEOs have many choices in navigating the capital arena, which now includes the advent of energetic angel groups, seed funds, EB5, accelerators, incubators, and corporate VCs.
Paradigm Shift for Startups
At that critical early stage of getting the concept vetted, the new-age startup CEOs no longer need to rely upon traditional VCs to get noticed. This is a huge market paradigm shift, as some of you have experienced over the past few years. I am even seeing some startup CEOs choosing to move out of the comforting ecosystem of Silicon Valley and setting up their shop up north in the city or in Southern California. (More to come about LA vs. Silicon Valley startup scene comparison next time.)
Many Routes to Funding
You would think that startup CEOs are confused with so many paths to get their business growing. Yet, most of the CEOs I have worked with in recent months seem to still have that keen focus and unabated passion to build their company with efficient capital and speed in mind. I love that mindset for startups, as it resonates with all stakeholders. Handling this like any complex business issue, these emerging and sophisticated entrepreneurs know to analyze the pros and cons of many routes to fund and develop their startups. They get that not all startups fit the traditional paths of getting funded by the traditional VCs. Perhaps they are being opportunistic about all these other venues outside of traditional sources. Perhaps they have had bad experiences in the past with those VCs. No matter, I have personally observed these sweeping trends in the past few years.
Opportunities and Risks
But be cautious, as these trends may not give you the definitive story. The answer to the right path of being funded and supported really depends on each individual startup. There is no simple solution for all. For some startups, it makes sense to ride the vibrancy of these newer and emerging capital sources. But will these funding sources be able to withstand the turbulence of venture capital’s up and down cycles? Will the non-traditional sources allow for future expansion, or will the fundraising process become more difficult, as VCs may want to push the non-traditional sources out of a company? Are these non-traditional sources here to stay or will they be fickle? Are the top VCs still the best route if you can get their attention? If so, when is the right time to get best leverage of that connection?
The Startup Landscape
If I were starting a company of my own again, I would try to gain insights into all sources of capital funding. I would map out and analyze the entire capital raising cycle from inception to end. Who can my company best benefit from at the very early stage while minimizing ownership? Who can really enable me to leverage the relationship to further my business plan now and in the future? What are the key decision metrics to pursue at seed stage, early stage and late stage investment?
I suspect there is no single answer that fits all. It all depends on your unique circumstances, your business model, and your vision. So with that, it seems that nothing really has changed for the entrepreneurs. I think that you still need to be honest about where you were, where you are today, and where you want to be tomorrow…
Robert Lee is a Managing Director at The Brenner Group, one of Silicon Valley’s premier professional services firms. He has more than 25 years of leadership in venture capital, startups, strategy consulting, global operations and business development. Robert manages the firm’s overall corporate strategy and development.
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