1/27/2005

"Hope is Not a Strategy"

"There is always an element of optimism in every venture deal. But often times the optimism gets in the way of critical thinking.

I remember attending a board meeting...and the CEO presented the sales pipeline. There were a ton of deals on the pipeline that were going to close within the next quarter.

But the company was running out of cash. The CEO was confident the sales would close and everything would be fine. Bliss asked him, “what happens if we don’t close the deals?” The CEO didn’t have an answer. He simply hadn’t considered that possibility.

Out came the cliché. Bliss said, “well hope is not a strategy and I suggest you get one, and quick.” That company developed a plan B which came in handy when the sales didn’t come in and we salvaged the deal and got our money back.

So when developing your business plan, don’t be too optimistic, think about the downside, and develop a strategy for dealing with it."

From the post: A VC: VC Cliche of the Week.