Many people say that the advantage of venture capital funding is that it shortens the time to roll-out your grandiose plans. If you need a coder, no problem go out and employ a couple, need to market your as undeveloped product, no problem employ a marketing company, and always get the best as it is not a problem because you have those dollops of cash lying around.

My personal experience has been quite the opposite, where funds nearly bankrupted ValueCard before we even got started. In our early days we had more than sufficient capital, lets call it our dot-com days. This was private funds, so no ludicrous war chest, but more than enough to go around.

The problem with having sufficient cash in the bank is that there is no initial urgency to get clients on-board as you first want to “lay a solid foundation”. So we went out and got a fancy office, kitted it out with nice furniture and started working on the business plan. As if that was not enough, a very good secretary was employed, to handle all those calls that we would be receiving from potential clients; wanting to come for a quick coffee at our nifty offices while discussing the business that they would send our way.

Because there was no urgency it took us much longer to develop TenderSystem and exceeded the budget dramatically. We also didn’t have any clients, as it was difficult to sell a vision without a product to back it up.

We then woke up one morning and realised that we were technically insolvent and still burning cash as if it was going out of fashion on our nice to haves. Fortunately we were able to salvage the situation by cutting all unnecessary costs, even though it was not so easy to renegotiate those agreements, and also got hold of some bridging finance. We were also able to get clients to use our products and services, as it is very easy to when you are “hungry”.

The end result is that the company survived, and I think became much stronger from the experience. We do not have venture capitals breathing down our necks to deliver immediate results, to the detriment of sustainable growth, and can concentrate on the company’s future.

I understand that the lack of funding normally results in bankruptcy but think that too much initial funding is just as detrimental, even though it just prolongs the inevitable much longer.