Kauffman Sketchbook explores where entrepreneurs get money (Video)December 2, 2011 by Michael Stacy
Video from kauffman.org
The folks at the Ewing Marion Kauffman Foundation have released another of their signature animated sketchbook videos, and it’s one that will likely leave proponents of boot-strapping businesses nodding their heads in agreement.
Paul Kedrosky (left, photo from paul.kedrosky.com), a senior fellow at the Kansas City-based Kauffman Foundation, narrates the video, entitled “Money Game.” Kedrosky discusses five primary sources from which young businesses get their money: founder savings, credit cards, friends and family, banks and venture capital. In doing so, Kedrosky highlights a couple of interesting statistics.
For one, he points out that half of young companies get the money they need without having to look outside the company. “We talk a lot as if all companies require all sorts of external capital,” Kedrosky says, “and the reality is that more than half of young companies get all their funding from a combination of founder savings and then cash flow from the business.”
He also mentions that less than 20 percent of the fastest growing companies in the country took any venture money. He continues his discussion of venture capital by discouraging entrepreneurs from seeking funding from VCs if they don’t absolutely need it. He calls VCs “hugely important” for growth companies, but concludes by saying that “there’s no better thing than being in full control of your own destiny.”
Of course, Kedrosky elucidates his own thoughts far better than I can, so if you have four minutes to spare, give the video above a watch.