A small percentage of startups ever get funded.
The search for capital is an ongoing one for many businesses. Once an opportunity is identified, most companies don’t hesitate to snatch it up. Then what happens? Entrepreneurs quickly forget that VC money comes with strings. Krishna Kolluri explains what the implications of this shortsightedness can be in a recent article.
Internally, a VC is obligated to net a high return for the people that are fiscally backing them: the limited partners. Because of the risk involved in venture capital, the return for limited partners needs to be high (somewhere in the mid to high teens). Add to that the firm’s cut and you can quickly see the expected return rise. Of course, the time it takes to hit these numbers is important, too. A 25 percent return in two years is much better than one that takes a decade. For more on what you can learn from wearing your VC’s shoes, read the full article by Kolluri.
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