It is an empirical study that about 50-60% of start ups fail. The studies also bring out that a high proportion of those failures occur when the start up founders take external funding from PEs/VCs.
There are two ways to look at why this happens on getting funded.
The investors perspective is that the founders cannot grow with the business. They lack the skills that it takes to go beyond start up state and build the business into something large and viable. And if they are not willing to get in senior management then the start up will start to flounder beyond its initial momentum.
There is however another perspective to this situation. How exactly did the PEs/ VCs muddy the relationship between the founding team? Did they play one against the other? Did the emotional bonding that the founders have, start breaking up with the induction of a mercenary third party.
Unfortunately the second aspect is not covered in this study or in any other study. The founding team that broke up are the vanquished. The victors are the PEs/ VCs who take control and are a cohesive and persistent industry force. The start up founders head their different ways into oblivion. No one covers the history from a loser’s perspective.
It is rare to get news like this come out. Reading between the lines can be interesting to know why a business that survived for generations broke up on getting externally funded.
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