One man's opinion on Venture Capital Basics

No A for effort

I get to see a lot of worthy companies in my current job. Lots of them trying to do good. Unfortunately, many of them are not profitable, and are better off becoming charities, rather than companies. They’re not sustainable, and thus, can’t ever become a good investment vehicle. There is no A for effort when your very existence depends on sales to customers.

Ego

I’ll admit it. I do check my profile views to stroke my own ego. It’s a form of mental masturbation. Does nothing productive, yet is self gratifying in its own way.

Sales

This is the life blood of every company.

It’s the ONLY way to get money into the company. Let me repeat that. THE ONLY WAY to get money INTO the company. Everyone else spends money.

What am I worth?

Valuation is always a tricky number to discuss. There are many ways to justify a number, but the only number that’s “right” is the one that allows a transaction to occur.

Partners

Names have been changed to protect....somebody. Talking to George the other day, he said that he didn't want to start a business with Fred. We're all friends, but George wanted to say his decision wasn't personal.

Smart enough to fail

The wonderful aspect about being an investor is the number of highly intelligent people you get to meet. I'm usually the dumbest guy in the room, and it's comforting to know that I'm surrounded by a lot of smart people. I can hear a question asked to the entrepreneur, and usually get the correct answer.

Times, they are a changing.

Shannon Henry brought up this article about transparency in VC. <http://www.washingtonpost.com/wp-dyn/articles/A33839-2004Aug25.html> In short, I think it's a good idea.

Change is always disruptive.

Do you deserve to be happy?

Most folks never really understand what they want.

They see examples of what other people have, and other's accomplishments and say "I want that."

This is a fundamental confusion of what they want, and what makes them happy. The trappings of success, the veneer of joy can be attained, but few are really satisfied in their accomplishments or the path they took to get there.

Are you perfect?

Ask yourself if you could be the marquee investment for the fund? Do you really symbolize everything they want to accomplish? Is it from your perspective, or theirs?

How will the fund help you? As simple as these questions are, the answers should not be. An "Of Course! How stupid are you?" answer hasn't given much though to the needs of your investors, or their investors (the LP's).

Pick your targets well.

Most success stories I hear about investments are those entrepreneurs who have tried to contact the investors beforehand. Using a shotgun approach and blasting your business plan to everyone has a low chance of success. In finding a job in the traditional job market, shotgunning your resume has an equally low chance of success. The only advantage in the job market is there are more employers, than there are VC funds.
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