How many friends do you know who have received venture capital in the past 12 months? In the past 24 months? Ever in their entire careers? I'll bet you the number is small. Most entrepreneurs don't get the chance to receive VC or professional funding. Why? Well there are a couple of reasons:
- The idea doesn't fit within the VC's requirements - VC's have very specific needs (i.e. size of deal, requirements for capital, timing and space, etc) and most entrepreneurial ideas don't match their requirements. That doesn't mean that the idea is bad, just that it has to be financed another way.
- The entrepreneur doesn't have the right access - If you are not introduced or referred into a VC source, you probably won't get in. VC's say they read blind business plans sent in over the web, but jut think about how many plans they get from their referrals, much less blind over the web. They just don't have the man power. So most entrepreneurs either don't have the right attorney/accountant/etc to get the referral or they don't have any connections.
The odds are that you won't get VC funding for you next profitable venture.
So, let's look at VC and funding from a different angle.
What do VC's do that is so important?
I put that in a slightly sarcastic way, but it is true. What value does the VC community provide. There are two answers to that question.
- They provide their investors a way to invest in multiple start-up companies (i.e. diversify their capital across many opportunities).
- They provide a way for investors to have professional oversight over the management of these start-ups.
And as an entrepreneur you should do that as well. You should think like a VC and put your most important asset (your time, intellectual horsepower, and execution skills) into as many ventures as possible. Using the Organic Cash Cow philosophy you should:
Stop Thinking Like An Entrepreneur And Start Thinking Like A Venture Capitalist
To keep with my mindset of publishing more often, I will continue this discussion in several parts over the next few weeks. Look forward to Part 2 ...
See you on the wire