Suraj Kumar Rajwani, CEO of DoubleRock, Discusses 6 Ways Venture Capitalism Has Changed Over The Pas

In the past decade, venture capitalism has changed drastically, says Suraj Kumar Rajwani, CEO of DoubleRock, from how it had been in previous decades. The 1990s and before were a time where entrepreneurs had to pitch their ideas to investors. In most cases, success depended on very little more than a good idea, lots of passion, and some luck.

Today’s startup atmosphere is much different, especially if companies want to go through traditional funding routes, such as venture capitalists or angel investors.

An entrepreneur pitching an idea today will need just as much passion and drive as ever before. Still, they will also need a detailed business plan that shows market analysis, projections for revenue and costs, intellectual property strategy, competition analysis, among other things.

Venture capitalists have become very picky about who they give money to and why. They expect companies to answer questions about every aspect of their business, especially who their competitors are and how they intend on staying ahead of them.

A great example is Facebook vs. Myspace. When asked why MySpace beat out Facebook in the early days, says Suraj Kumar Rajwani, founder Tom Anderson replied that he never thought about it as a real company – just something fun for him to play with.

This approach allowed the young company to do whatever they wanted without explaining it or even thinking about all the necessary pieces that should go into running a viable business.

It wouldn’t have worked earlier, but because the market had changed so dramatically between 2005-2006, people began flocking to MySpace because it offered the same features as Facebook (which was still in its early stages), it had more interesting content. It ultimately became the site people wanted to use.

Without a real business approach, even if your company is successful, you will likely never grow past that idea because you do not have the structure needed for it. This means entrepreneurs today need more than just an idea they are passionate about – they need to have solid business plans behind it.

Here are a few ways that venture capitalism has changed over the past decade.

1. Venture capital firms can’t just invest locally anymore

As stated before, venture capitalists are much pickier than they were in the past. They want to invest their money, says Suraj Rajwani, into companies that can provide them with returns rather than just throwing it all away on ideas that may or may not ever be successful. This means smaller firms might need to partner up with others to gain enough investment capital.

This means investors are more likely to invest in larger chunks of companies rather than just one small project. This is good for entrepreneurs because it means there is more chance they can find someone to take on their idea, but it also takes some of the fun away. No longer will you see an entrepreneur with their garage full of servers working away on ideas all by themselves

2. Venture capital firms need to be multi-stage and global

Venture capital has evolved so quickly that it almost seems to have skipped a generation. There are now firms popping up everywhere because they need to for their survival. This makes it easier for entrepreneurs to access these funds and means competition is even more fierce than before.

3. Acceptance of lower ownership thresholds for the best companies

Traditionally when a venture capitalist invests in a company, they want to own somewhere between 20-30% of the company. Not anymore – now, when an investor makes their first investment in your company, you can expect them to ask for ownership much higher than that. Some are even asking for 50%, sometimes more. When firms invest this kind of money into young companies, the stakes become much higher, and therefore there needs to be more control over who is allowed onto the team.

4. Expectations of platform services are changing

In the past, when a venture capitalist would invest in a company, it was to help that business grow or find success from an idea they believed in. Now there is a different kind of investment going on – rather than just buying stock and equity. Many venture capitalists are looking to gain more control over the company while still owning a big portion of what it has to offer. This changes entrepreneurs because now they want their say in certain decisions, such as how much money should be paid back to investors and what companies or partnerships should be made with others who might benefit the business down the road.

5. Firms and partners need to market themselves and their network of unions actively

To be attractive to entrepreneurs or companies looking for investment, venture capital firms need to advertise themselves and the people they will bring along with them. This can mean gaining a large social media presence and creating interesting content about what is going on within their company, so the people who will get involved know exactly what they are getting into. Without this kind of marketing, new investors may overlook these firms because there simply isn’t enough awareness about who is working there or what they do – and this could hold young businesses back from achieving success.

6. Legitimate Competition From Above and Below

When a company is getting investment from venture capitalists, there is competition from above and below. The competition within the firm comes from the fact that those who invest first want to see more and more money come in before they get their payouts – but this also means opportunities for smaller firms who can pick up these companies at cheaper prices later on. The competition then becomes about what deals need to be done and how much each investor will end up with at the end of it all.

Venture capital has changed, but there’s still a place for it

There are many positive things about venture capital, such as motivation, interest, communication, and trust. However, once the funds start flowing, the bottom line always wins out over everything else, which often leads to failure or separation for many of the parties involved. But even though there are differences in this investment method, some things have not changed – it is still about growth, expansion and being on top of what will be successful no matter how much risk it is involved.

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