CHAPTER 13Interview with a Successful Entrepreneur

In this chapter, Sanford Morganstein, former president and chief executive officer of Dytel Corporation, which started up in Chicago's nearby suburb of Arlington Heights, Illinois, replies to the author's questions concerning the venture capital fundraising experience from the entrepreneur's perspective. (This interview has been reprinted with the permission of Sanford Morganstein.) Mr. Morganstein successfully raised both seed and early‐stage venture capital for Dytel, a designer and manufacturer of innovative telecommunications products.

Question: What are the main problems facing the early‐stage entrepreneur in the venture funding process?

Mr. Morganstein's Reply: Many venture capital organizations pay more attention to early‐stage financing because of the higher potential returns concomitant with the higher risks that are associated with these investments. The problem for the early‐stage entrepreneur is the great imbalance between the entrepreneur's vital need to raise money, compared to the venture investor's need (or, more accurately, lack of need) to participate in any single investment. For the early‐stage company, getting funded is an absolute “do or die” situation, whereas for the venture investor, there are plenty of companies from which to choose. Perhaps a better way to state this is, if an investor passes on a particular investment, his loss is a loss out in the future, when and if the company is successful. ...

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