Bill Gates initially managed his business part-time as a university student. Steve Jobs started Apple with Steve Wozniak in a garage. After many success stories, venture capitals now have unprecedented generosity for poor start-up entrepreneurs, which at first glance seems a good thing. The article about “too rich to succeed”, however, suggests otherwise.

I cannot help but agree with what the article presents. Entrepreneurship, in its original form, involves much risk to an entrepreneur. Firstly, the entrepreneur must be willing to give up stability, for he usually quits college or forsakes a stable job to pay full attention to his business. Secondly, even with that, generally more entrepreneurs fail than succeed. Immediate availability of capital, however, lowers the risk for entrepreneurship, and encourages more people less qualified as entrepreneurs to start businesses. After all, even failed entrepreneurs today could get appreciation from big firms, and only capital providers need to bear the loss. Given the situation, today’s entrepreneurs will be more aggressive in taking risks than those who totally rely on themselves, or sometimes squander money unnecessarily on “management” and “structure”-whose benefits are only obvious in large firms-simply because they know not how to use the money.

In addition, even when a firm with ample capital at the beginning succeeds, it faces many internal problems. Firstly, investors need monthly or quarterly reports, which adds administrative burden to an entrepreneur. Secondly, investors could effectively influence business decision, sometimes against an entrepreneur’s right intuition. These will have negative impacts on expansion of start-up businesses.

I am not preaching that zero capital should be provided to entrepreneurs, but our investors need to spend their money more rationally. In the past, only start-up businesses that have survived and are prepared to expand begin receiving financial support in large quantities, so I believe that the bulk of money should continue being spent that way.

Reference: The “Too Rich to Succeed” Challenge Facing Start-ups

<http://knowledge.wharton.upenn.edu/article/what-happens-when-start-ups-raise-too-much-capital/>

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