Valid business model for web companies?

I have been reading and hearing a lot about how startups generate millions in VC funding to support their development as well as their growth. I have been wondering what are the positives and negatives with this approach against a team or an individual who starts small, promotes his service, builds up the user base, generate small revenues out of it and then uses it to further fuel the growth.

I see lot less risks with the second approach and you have everything to gain out of it and if your service is good you can still offer it for free and build up the revenues through advertising or some other means.I agree that if you are looking to provide a breakthrough-service that is not yet done by any one else then you will need the VC funding but otherwise I wonder if its needed to start so big and fail.


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