Don't Blame the VC; It's Your Fault
"The fundamental reason that only 2% of start-up business can attract professional investment is that the majority of entrepreneurs don’t understand how to properly structure a business or understand the investment process. Most of the new ventures that don’t get funded are due to:
* A belief that an Idea or a Technology + Capital = Success.
* An inability to understand the difference between an idea and what it takes to execute that idea into a revenue-generating business.
* The ignorance of not recognising that the funding process is structured to mitigate foolish risks and flesh out the criteria for success.
* The lack of communication and presentation skills.
* Unwillingness by the entrepreneurs to make an investment in developing the required skills to meet the critical success factors and adjusting their attitude to work in partnership with investors.
There are some fundamental rules successful investors, be they angels or VC’s, have in their bible. Investors who don’t always follow these rules are family, friends and fools.
Rule No 1
The idea is worth only 20% of the value of the venture...
Rule No 2
People – not ideas technology or money - build companies, thus they are worth 50% of the value of the venture...
Rule No 3
A successful and fundable business requires a sound structure right at the start, thus the structure is worth 30% of the value of the venture...
Rule No 4
Only products and services that can relieve a significant identified group of customer’s pains can generate revenue...
Rule No 5
Investors expect to exit with significant returns within six years...
Rule No 6
Strategies that are developed without total awareness of the forces and threats that can impact your business will inevitably fail..."
Read much much more in this excellent, comprehensive and pulls-no-punches article by Gerry Lemberg.
