While we focus a lot more on lean startups than startups that require capital to get going these days, fat startups still play an important role in developing large-scale success stories with significant, defensible, competitive advantages.
The bulk of the VC industry has moved away from the ‘fat startup’ category. Investors expect that you will have your product launched, customer acquisition model fleshed out fully, and a team in place before Series A.
However, infrastructure software, hardware, networking, chips – they all need capital. Even in cloud software, to build complex technology like personalization, analytics and artificial intelligence requires some serious investment.
I see a few trends after pondering and investigating the question: How do people fund ‘fat startups’ these days?
One, you need a track record to get VCs to write big checks right away, so, often, it is the serial entrepreneurs who get these opportunities.
Two, some VCs incubate such companies with their Entrepreneurs In Residences, who are again typically serial entrepreneurs.
For first time entrepreneurs, the options are more limited.
The most viable option is to bootstrap using services.
Deep domain knowledge in a certain field may also give you access to capital.
A coherent, high-powered team that is willing to work for equity and build a prototype, along with a clear vision of product, customer need, customer acquisition model may, sometimes, work as well.
While the industry is obsessed with lean startups these days, I believe there is tremendous value in understanding how to continue to build fat startups as well, alongside the lean ones. Here are some short 30-second videos answering the fat startup questions I am asked most frequently:
Is there any way to fund fat startups today?
Are there VCs who fund fat startups at the concept stage?
How do first time entrepreneurs without a track record fund fat startups?
Is it possible to fund fat startups in B to C?
Is it possible to fund fat startups outside Silicon Valley?
Photo credit: osseous/Flickr.com.