| Which is more likely to happen? You come up | | | | top notch hotel. Don't be surprised if your VC |
| with a great business concept, secure Venture | | | | backers drop $10,000 or $15,000 of your money |
| Capital funding and your startup goes IPO, making | | | | to attend one of your board meetings. Then |
| you millions - or you get struck by lightning? | | | | again, is it your money or their money? And |
| Unfortunately the answer is that you're more | | | | pragmatically which scenario would be better for |
| likely to get struck by lightning which, according to | | | | the VC's - exceeding the proposed massive sales |
| the National Weather Service has odds of 5,000 | | | | targets or having you miss your early targets and |
| to 1. Should you ever consider venture capital? | | | | then taking control of your company - dirt cheap |
| Companies requiring a significant infusion of cash | | | | - then exceeding the sales targets? |
| to get started may require this type of funding, | | | | Here is some great advice from Peter Ireland and |
| and could thus consider it as long as the founders | | | | his Smart Startup Guide (antiventurecapital dot |
| are aware of the long shot odds. If you're starting | | | | com): |
| up a truly capital intensive company, perhaps a | | | | First, chasing outside capital is by far the |
| biotech, medical device, or energy related | | | | most unpleasant and drawn-out ordeal |
| company, you might be forced to consider | | | | experienced by entrepreneurs. It always seems |
| Venture Capital. But if you plan on creating a small | | | | to take "forever". (For this reason, veteran |
| startup service company, a new accounting firm, | | | | entrepreneurs try to avoid raising outside capital |
| consulting practice, training firm, video production | | | | at all costs.) |
| company, cleaning services firm, boutique | | | | Second, based on the fact that your typical |
| software company, or any of the thousands of | | | | early stage Venture Capital firm invests in only |
| opportunities that aren't truly capital intensive, I'd | | | | one company out of every 500 business plans it |
| suggest you stay as far away from the vulture | | | | reviews, your odds of succeeding are only 1:500. |
| capitalists as possible. There are far better | | | | Third, in about 50% of instances where an |
| financing alternatives which offer greater control | | | | early stage company actually succeeds in raising |
| over your destiny. | | | | Venture Capital, the founder is fired within the |
| Are you thinking of creating a software company | | | | first year and kisses his or her stock good-bye. |
| which expects to hit $10 Million in sales in three | | | | Perhaps this is merely a buyer beware blog entry. |
| years - don't bother. Either you'll miss your | | | | I can't say that every VC has an agenda, other |
| targets and get booted and diluted or the resulting | | | | than massive financial returns, just that their |
| flip will yield you a fraction of what you would | | | | money is extremely expensive, comes with great |
| receive on your own. That's why Venture Capital | | | | risk and a significant amount of back seat driving |
| is a ludicrous bet for most entrepreneurs. But | | | | and preconceived notions. Bootstrapping is a far |
| worse than that, it's also a pressure cooker and | | | | better alternative for most startup companies, |
| you're almost guaranteed that you will lose | | | | and perhaps, if you're thinking of a startup that |
| control. Not only will you have the dubious honor | | | | requires a large capital infusion and must then |
| of giving away a huge portion of your company, | | | | consider venture capital, you should think of a |
| you'll also have a VC backed board breathing | | | | different business venture or a better funding |
| down your neck. They will be watching where and | | | | alternative. Are there any circumstances when |
| how you spend your money while they fly first | | | | venture capital is clearly a better alternative? |
| class and wine and dine in four star establishments | | | | They are definitely better than a loan shark and |
| at your expense. When they visit you, chances | | | | possibly better than a pawn shop which might |
| are they will be flying first class and staying at a | | | | charge 10% interest per month! |