] HipMojo.com » The Cancer that Kills Startups: Scaling a Premature Business Plan

The Cancer that Kills Startups: Scaling a Premature Business Plan

VC Fred Wilson not only offers some candid insights into his track record as a venture capitalist, but he ponies up the most accurate description of why venture-backed businesses fail:

Most venture backed investments fail because the venture capital is used to scale the business before the correct business plan is discovered. That scale/burn rate becomes the cancer that kills the business.

Read more. But this is pretty much exactly what I mentioned some time ago regarding frugality, one of Sequoia’s main criteria to invest in a management team or business. Peers in WatchMojo.com’s cohort group have raised anywhere from $5-16M in funding… if you include the earlier players who started in the late 1990s, then that amount can go as hugh as $32M.

Madness I tell you. I firmly believe that video content producers can become successful exits in the $100M to $1B range, if not more… but because the broad web video advertising market is so nascent, these companies have built up operations that are too bloated and what not… most of these companies will have burned way too much money and might not even be around to see the day by the time the video ad market develops…

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Posted By: Ashkan Karbasfrooshan | Nov 30th

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