Archive for August 14, 2014

Don’t Get Distracted Raising Venture Capital

Written by Sean Murphy. Posted in 1 Idea Stage, skmurphy

It’s not a mistake to accept venture capital if your business merits and requires it for growth. Don’t get distracted seeking it until then.

“The seductive narrative of Silicon Valley stars a genius-hero who goes on a journey, overcomes myriad obstacles, has a flash of insight and is rewarded by wise and benevolent investors with Series A funding. This narrative is bullshit, but it’s everywhere.

Venture capital is not a rags to riches story. It’s the inspiring tale of redeploying resources from a lower- to a higher-performing asset class. There’s nothing wrong with that – I find it kind of magical – but let’s not pretend we’re doing something else. In particular, let’s not pretend that this is an engine for social justice. You need a separate corporate philanthropy branch for that.”

Rachel Chalmers “Five Reasons Not To Raise Venture Capital

Here are her five reasons

  1. You probably won’t get a fair hearing.
  2. Raising venture capital doesn’t make you a good person.
  3. Most companies won’t ever generate venture outcomes.
  4. When you raise venture, you narrow your options.
  5. Venture math is a harsh mistress.

I think she misses the real top five:

  1. It’s not saying no to a real term sheet that is a mistake, it’s wasting time seeking investment instead of learning about the market.
  2. Writing a business plan or business model canvas is not nearly as useful as writing your customer interview questions or a one page sales pitch. Getting feedback on either  from customers will tell you more than feedback from a VC on a business plan.
  3. Asking prospect for money for an MVP tells you much much more about the market than any feedback from a VC.
  4. What can sound like advice on direction from a VC is actually a no. For example:  “this is interesting but we think addressing problem X or Market Y is more promising, think about it and come back and talk to us again.”)
  5. If you think money will solve your problems, you don’t have a good handle on your problems.

Affluenza victims, regardless of their socioeconomic level, falsely believe that money can solve all their problems.
Jon Winokur

Related Posts

 

 

Quick Links

Bootstrappers Breakfast Link Startup Stages Clients In the News Upcoming Events Office Hours Button