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Why Not To Take A Big VC Round Of Funding?
Fremont: The newly launched Happiest Minds Technologies raised a whooping $45 million in series A round of VC funding, and Neo Technology closed $10.6 million in series A round of VC funding. Startups raising such huge funds are not new now-a-days, but is it safe for them to raise such a big amount of funding in the initial days? Below mentioned are few such reasons that states why should one not raise a big round of funding in the initial stage of the startup.
A False Sense Of Security
A big sum of money raised in the initial stage, when the idea is not ripe enough or not quite tested in the market, but have promising future, may lead the startup to create a false sense of security, make management lazy and unfortunately set up a series of events that take the founders out of the game. VC funding comes with costs. Fund raising takes time away from serving the customers, enables costly mistakes, removes spending discipline, adds additional masters. Also, raising a VC fund means giving away a substantial amount of ownership.
