Good article in the Wall Street Journal about the new wave of venture capital and angel investing. As many of you have seen, newer individuals who are investing are past entrepreneurs themselves. Personally, I think this is a welcome change since these folks understand what it takes to start and run a company. In my time with my company and helping others, I’ve heard a lot of inane statements from investors who just don’t get it. For example, I’ve heard this:
“Well, if they need this technology we can just keep raising prices and they’ll pay whatever we tell them.”
Yeah, that’s a good idea b-school boy. Unfortunately your book learning doesn’t completely translate into the real world. Even if you think you’ve got a monopoly (you don’t), then there is a price point where customers will live without whatever you’re providing (product, service, technology) and keep doing business how they were before.
Another one that I recently heard was:
“We’re not convinced about this product/service. If there was a demand for this there would be bigger competitors doing this.”
Say what?!? Isn’t this the essence of starting up a company? You see an unmet market need and you fill it. By this inane argument there should be no startups and everything that needs to be done will be done by big companies.
My point in all of this is that you need to choose your investors wisely. Sure, there are a lot of times where you have to just take what you get. When choosing between shutting down your company and taking money from morons, the clear choice is to live a little longer and hope for the best. The best being that the morons aren’t complete imbeciles (this can be a lot to hope for). But if you have a choice, always choose the investor who has been there and done that over the investor who just shows up with a wad of cash.
Oh yeah, this will likely be the last post for the year so happy new year! I’m looking forward to keeping the discussion going next year!
[via A VC]
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