These days, we focus a lot more on lean startups than startups that require capital to get going. The entire industry has moved away from the ‘fat’ startup category. However, infrastructure software, hardware, networking, chips – they need capital. Even in cloud software, to build complex technology like personalization and analytics requires some investment.
How do people fund those?
I am seeing a few trends:
– You need track record to get VCs to write big checks right away, so, often, it is the serial entrepreneurs who get these opportunities.
– Some VCs incubate such companies with their EIRs, who are typically serial entrepreneurs.
For first time entrepreneurs, the options are more limited.
– The most viable option is to bootstrap using services. You should study my book on that topic to get more insights into the process.
– Deep domain knowledge in a certain business may also give you access to capital.
A few case studies from our Entrepreneur Journeys series:
Incubating a Fat Startup at Greylock: Ash Ashutosh, CEO of Actifio (Serial entrepreneur as EIR)
Building Fat Startups: Nasuni CEO Andres Rodriguez (Deep domain knowledge in storage + serial entrepreneur)
Building a Fat Startup: From Israel to Silicon Valley, Qwilt CEO Alon Maor’s Journey (Interesting use of bridge financing with Series A already negotiated; product was released 20 months AFTER Series A)
From Berlin, Bringing Art Auctions Online: Auctionata CEO Alexander Zache (Deep domain knowledge in Art Auctions; first-time entrepreneur)
Also, there are certain VCs who are particularly good at these kinds of investments, especially Asheem Chandna and Vinod Khosla come to mind.