"How to fund a startup" by Paul Graham

Before becoming an entrepreneur, I was a CFO.  Raising money from early stage investors, managing the relationships, going public and dealing with the public market were all part of the territory.  Met several bankers, fund managers, analysts and retail investors in different corners of the world.

Most of them are good partners.  Keen to grow their wealth.  Keen to protect it.  Eager to find the next big opportunity.

However, the goal of an investor is different from the goal of an entrepreneur.  Understanding and managing the conflicts is important.  As important as getting your business vision and execution right.  Make a mistake there; and you could end up spending too much time dealing with yourself instead of your market.

As a start up, I have stayed with "bootstrapping".  The freedom to build the business for the long term is delectable.  (Of course there is a concern that the enterprise may end up becoming an echo chamber of my thoughts; but ensuring this does not happen is a lesser challenge than managing goal conflicts at an early stage).  This is probably easy when you become an entrepreneur in late forties; may not necessarily be possible when you are young.

Paul Graham's article (written about four years back) about "funding for startups" continues to remain current; and provides an excellent insight into the subject.  (Click here to read).

Anand Rajaraman has a different view in his blog.  (Click here to read).   It is not easy to differ with a young billionaire with a doctorate from Stanford.  However, am not sure excellent businesses are, as a rule, always characterized by "market, team and technology".  Venture investment has been sufficiently scarce so far and therefore has the luxury of staying focused on the "sexy end of the pyramid".  However, it is possible to prosper with "simple ideas neatly executed".

My advice to young entrepreneurs:  Stay away from third party investors until you can.  But do not shy away from raising funds when you can "feel" your muscles.