In the world of entrepreneurship, the choice between venture capital and angel funding stands can be critical for the long-term success of a startup company. Traditionally, companies backed by venture capital are hailed as the frontrunners in success, overshadowing their angel-funded counterparts. However, a recent in-depth study of the Indian startup landscape published in the International Journal of Entrepreneurial Venturing, challenges the received wisdom and sheds new light on a more nuanced perspective.
Praveen M. Kulkarni of the KLS Institute of Management Education and Research, Y.M. Satish of the MS Ramaiah Institute of Technology, and Prayag Gokhale of KLE Tech, Belagavi Campus, all in Karnataka, India, looked at the economically vibrant backdrop of Bengaluru. This region is perhaps India’s leading startup hub with over 5000 ventures across many diverse sectors. The research investigates the performance of startups based on their funding sources, venture capital or angel funding. The findings have implications in this region and way beyond it.
The researchers emphasize the significance of adopting a professional approach and utilizing appropriate performance metrics for startups in the Indian business milieu. Unlike earlier research that often simply drew from the experiences of established small and medium-sized enterprises (SMEs) or larger corporations, this study instead focuses on the distinctive framework of startup ecosystems.
Venture capital funding is well known for not only injecting capital into a fledgling company but also in providing invaluable experience and knowledge-based support for the company. Angel funding, on the other hand, tends to operate through third-party arrangements and while it allows startups to retain complete ownership and control, this means angel-funded startups do not necessarily benefit from the external expertise crucial for sustained growth that is almost a given with venture funding.
Kulkarni, P.M., Satish, Y.M. and Gokhale, P. (2023) ‘Performance measures of startups’, Int. J. Entrepreneurial Venturing, Vol. 15, No. 5, pp.409–422.
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