“Access to Funding” Is More About Perception than Reality

Yesterday I had a conversation with someone who wanted to establish a substantial private investment seed-stage fund in Baltimore. Combined with the efforts of several groups, including Baltimore Angels and the new proposed Invest Maryland $100M fund, I remarked that there might suddenly be a glut of available funding for companies!

What would this mean? Some have said that the mid-atlantic region has suffered from a shortage of startup funding; that angels are too few and far between, and that large investors and VC firms are “risk averse.”

I don’t think this is a) the real issue, or b) especially true. Companies that have shown strong growth have had no problem securing the funding they need. I’m thinking of Sourcefire, Advertising.com, BillMeLater, Under Armour, and plenty of others.

But this does not mean that a perceived surplus of funding would be a bad thing. If a perceived availability of capital caused an influx of folks looking to engage in entrepreneurship, more entrepreneurial efforts would form. If more people were confident that they could grow a new business when they meet with success, then they would be more inclined to get to that point.

Most entrepreneurial endeavors really don’t need much in the way of funding; the best companies start when people throw their lots together to work on things they care about. Often, young people do best at this because their cost of living is lowest.

So, since “funding” is actually the last thing that most startups actually need, how would the psyche of potential startup entrepreneurs be affected if lots of funding was obviously and ostensibly available?

I think it would help, but not because people are taking advantage of the access to funding. It would help because it would lessen fear around entrepreneurship and convince more people that it was a “normal” path to pursue. So, let’s bring it on. Prepare for a glut of startup funding in Baltimore. It’s coming, and you don’t even especially need it.

What would you start working on today, knowing that there’s plenty of funding coming for ideas that show promise?