BUSINESS BLOGS
BUSINESS BLOGS
category: business
09 Jul 2008

They won’t admit it, they will blame the economy, Al Qaida, whatever is the worry du jour, but the anemic confidence levels of VCs are actually explained by a few simple factors:

- Investing in flash over substance (”that’s cool” doesn’t pay the bills)

- Being out of their element in advertising and media, which makes it hard to pinpoint successful models versus flash in the pan ones. Listen, VCs are smart guys, but they really are clueless about the inner workings of ad agencies, media, publishing etc., yet we live in an ad-supported ecosystem.

- Draconian deal terms: if you can avoid VC money, you do. If you are a service provider - and VCs are - that’s not a very good position to be in, at all. I want a few things when I look for funding, I am flexible on a few if the overall deal is fair; VCs? Nope: “This is the way it’s been done for years”. Yeah… that explains aplenty. A few of my favorites include taking the founder’s shares away, making them vest over time? Really? Why don’t we take your shares and vest those puppies over time… let’s see how often you pass by the office to sat hi.

- Running before walking: successful entrepreneurs and businesses need to crawl, walk, then run… occasionally slow down, only to repeat. VCs come in wanting to run before the company even knows what direction to look in, let alone head. This is a recipe for disaster.

- M&A is the only viable exit… and that means that most exits will be in the less than $1B range… because if they get too big, it’s harder to obtain a liquidity transaction.

- Arrogance: Let me share with you what 99.9% of entrepreneurs think, we very well might love you VCs personally… but if we could have your money without your baggage, we would take that any day… it’s nothing personal, and it’s not that we don’t value what VCs add, it’s that…

- Lies: VCs lie about wanting to roll up their sleeves and build companies by your side. That’s a blatant lie. Look, VCs have worked hard to find themselves in the position to be investors. If they wanted to be entrepreneurs… guess what, they would be entrepreneurs, on the other side of the fence.

- Greed: Worst off, VCs want control, and subservience. They won’t come out and say it, but it’s all a part of the ego and fiber of the investing mindset. VCs want control, the more of the company they own… the more money they make for the level of investment and time they are putting in. The very nature of the VC/entrepreneurial relationship is confrontational.

- Incestuous circle: Silicon Valley is crazyville… Manhattan money is just as bad. If you are in, and part of the inner circle, you have access to unlimited funds. If you are not, then you can go pound sand.

The truth is these days, you know you don’t need VC money. Hardware is cheap, software is largely free. Moreover, with decent credit you can finance everything… and if you are a smart entrepreneur who can capitalize on trends and does not suffer from herd mentality, then you can recruit talent.

Am I missing anything?