Starting a Tech Company, VC Money and Reality.
March 25, 2014
One day you wake up and decide that you want to start a tech company but you don’t have the cash. So you figure that the easy way to get rich, is to go get some of that juicy VC (venture capital) money. Easy enough … right?
Here are a few facts you should ponder before you decide to jump into this pool:
- You have about a 20% chance of making money when starting any new business.
- With VC backers, your chances are even less! Learn why below …
- VC guys are looking for flipability of startups and NOT viability.
- VC guys will very often flip your butt out the door when they decide to. Yes, firing founders is not uncommon!
When you make a deal with VC guys, you are making a Faustian bargain – a deal with the devil.
I am not saying that all VC guys are evil but they are typically motivated by selling out or going public. They don’t make money if you create a nice business that makes $500k/year. Nope, they want the multi billion dollar flip or an IPO, so that they can dump all their shares onto the public.
In a nutshell:
The business of finance and venture capital is one filled with sharks and quick-cash money junkies. Creating long term sustainable value is not the game.
Tech Start-up Mania
We now have a new mini-mania in tech startups. I think too many people watch SharkTank or have watched the movie The Social Network – everyone thinks they can build the next huge tech company. The reality is that Facebook, Instagram and other high-flyers that you hear about, are the lottery ticket winners. The vast majority of companies fail. These are all the startups you’ve never heard about …
VC money = loss of control
One thing you have to be aware of, is that once you bring in outside money, you will lose control – they are the boss.
For me, this has always been unacceptable because I went into business primarily for independence. You will work harder and longer when you own a business but the trade-off is that you will have freedom to get up when you want, to work on WHAT you want – you will have intellectual and mental freedom.
With lots of hard work and a pinch of luck, you may have a few bucks too!