Startups without large amounts of venture capital can be more innovative
While the venture capital industry may have constricted significantly in the face of the recession, that is not necessarily bad news for Canadian small businesses looking for a little seed money - in fact, for those starting a small business, lower funding amounts can actually be a blessing in disguise, reported the Globe and Mail.
The Canadian Venture Capital and Private Equity Association reports that venture capital investments decreased by 42 percent in the second quarter of this year compared to the same time last year, though the number of startups receiving funding has stayed relatively stable, the newspaper cited. This means that Canadian small businesses are still getting venture capital funding, just not as much.
But in many cases, this forces startups to become more efficient and even innovative, instead of relying on funding.
"When you write big cheques, money can solve small problems," Amar Varma of Extreme Venture Partners told the Globe and Mail. "But downturns force innovation."
This phenomenon potentially explains why more successful startups were founded during recessions or bear markets than during times of prosperity, according to research from the Ewing Marion Kauffman Foundation.
