Don't Take the Money!

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Don't Take the Money!

With the venture capital and IPO markets opening up big time, everybody is an entrepreneur again. That's good news.

Everybody also wants to raise venture capital again. That's bad news.

Martin Tobias has a great post where he talks about telling three entrpereneurs in one day to avoid VC. That's pretty good. A VC talking against his own game. I like that.

I sometimes do a class at NYU's Stern Business School called "Venture Capital, When You Need It, When You Don't". I make the point in this class that Venture Capital is the wrong source of capital for the vast majority of entrepreneurial ventures.

Here is the powerpoint I use when I teach the class. If you are thinking about raising venture capital, give this a read and think hard about it before you start the process.

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» Don't take the money from Flow Of Time
Fred had a great post why not to take VC money. 99% of startups do not need it. Exactly my... [Read More]

Tracked on Mar 17, 2005 9:27:33 AM

» Today, He Told Three Entrepreneurs Not To Use VC from Business Opportunities Weblog
Martin Tobias: I have been quite vocal in the past about how entrepreneurs should not raise money unless they really need it. Today for some reason that theme came home to roost in spades. I told THREE entrepreneurs that they... [Read More]

Tracked on Mar 17, 2005 9:49:58 AM

» VC Money - When NOT to take it from michael arrington
Fred Wilson writes about VC money, when to take it and when not to. He says in a linked powerpoint that the "average founder who uses VC owns less than 10% of the business upon exit." Wow. I was recently told be a friend hitting the VCs that a top line... [Read More]

Tracked on Mar 17, 2005 1:10:33 PM

» Don't Take the Money from Business Opportunities Weblog
Following up on my previous post, here's more from Fred Wilson: I sometimes do a class at NYU's Stern Business School called "Venture Capital, When You Need It, When You Don't". I make the point in this class that Venture... [Read More]

Tracked on Mar 17, 2005 2:00:10 PM

Posted March 17, 2005 in Venture Capital and Technology

Comments

Are you familiar with Amar Bhinde's book "The Origin and Evolution of New Businesses"? In it, Dr. Bhinde, who at the time he wrote it was at Harvard's Business school, writes about the class of what he terms "successful startups" - which are not VC backed but rather opportunistic and fast growing.

His discussion about when and why VC funding is appropriate - but only for a minority of startups - is extremely good.

Shannon

Posted by: Shannon Clark | Mar 17, 2005 9:48:17 AM

You think the kids at Stern noticed your misspellings? It's M-O-R-T-G-A-G-E-S.

Posted by: Matt | Mar 17, 2005 1:21:09 PM

thanks for the info. it came at a great time. bty- i love your weblog!
Keep up the great work

long time reader

Posted by: angela coors | Mar 17, 2005 1:26:03 PM

I disagree with the notion that "heavy R&D component" makes a company more or less venture fundable. More correct would be "defensible technology with clear visibility to commercialization with finite dollars on a finite time scale". most of the R&D done in areas you listed (semiconductors, biotech) is actually NOT VC financed -- it's financed by government and large corporations -- who can afford to pour massive sums of money into potentially endless projects with very uncertain and potentially limitless potential.

Also, you list "working capital requirements" as a reason for VC, and it ISN'T -- that's the job of a bank. Take a look at one of your examples -- Amazon. They've got 1.86 Billion (with a B) on the balance sheet.

Posted by: another.vc | Mar 17, 2005 1:57:40 PM

I think it's great that a VC would warn against taking on Venture Capital. VC money is a serious undertaking, and let's face it- it's not for everyone.

To admit weakness is a sign of strength, IMHO.

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Posted by: accords | Nov 4, 2005 10:03:31 AM

A VC

Musings of a VC in NYC