VCs could be bad for your start-up. Here's an alternate model of funding

Professor Saras Sarasvathy says have someone pay you to build the product, reports Tech in Asia

They think the products they are building are worth an X amount of money and there is a market of millions or even billions of dollars out there. In predicting the future, these bright, young entrepreneurs are nailing the first, fat nail into their start-ups’ coffins. Professor Saras Sarasvathy is sitting on enough data to tell us this.

"In Bangalore, they are doing more of it because they think predicting the future is the way to get venture capital funding. They are not even predicting the future to get the customer; they are predicting the future to get VC money!" Professor Saras says.

She is one of the top scholars in the world on the cognitive basis for high-performance entrepreneurship. She is a professor at the University of Virginia’s Darden School of Business, and also teaches doctoral programmes in entrepreneurship and business strategy across Europe, Asia, Latin America, and Africa.

It turns out that these successful companies get their money from customers. Or suppliers. Or both. Microsoft is a big example, the professor points out. "Who funded Microsoft? IBM. IBM paid Microsoft for their software because they wanted that. That is how Microsoft was built. When the customer actually pays for what you are building, you have built something that the customer actually wants. Then you can turn around and sell that software to others too," she says.

This is the kind of stakeholder partnership that the professor is championing as a viable alternative to venture capital funding.

"If somebody is not paying you to build the product, you are betting that your product is something people might buy. Then, you are in the gambling business," she says. This is an excerpt from an article published on TechInAsia. You can read the full story here