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| SMALL BUSINESS TRENDS brings you daily updates on trends that influence the global small business market. | ||
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Anita Campbell, Editor |
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| Past life: CEO, corporate executive, tech entrepreneur, retailer, general counsel, marketer, HR ... (more) | ||
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Small Business Trends Radio Tuesdays, 1:00 PM Eastern U.S. time on Voice America network Click to listen November 1st: Torsten Jacobi, CEO of Creative Weblogging, joins host Anita Campbell. Sponsored by Six Disciplines. Show details. |
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Wednesday, November 24, 2004 | |
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Venture Capital: The Illusion of Easy Money | |
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 I am reading Guy Kawasaki's The Art of the Start. For anyone who doesn't know, Guy Kawasaki is a venture capitalist and managing director of Garage Technology Ventures.
This is a snappy book filled with street smarts about startups. It's set up so that it is easy to read a section here and there when you have time. In one part he offers FAQs about raising capital for startups, with his trademark blunt wit: Q: If I do not have an IPO or acquisition as my exit strategy, will I ever be able to attract investors? Would investors ever be interested in making their return through profit sharing or a buy-out from the founders of the company in five to ten years?Venture capital is an unattainable illusion for the vast majority of small businesses. Most small businesses will never be initial public offering (IPO) material. And entrepreneurs who are so emotionally attached to the business that they cannot stand the thought of selling it should forget about venture capital. Bottom line: Guy describes key reasons that most businesses are not good candidates for venture capital. That, and minor little points such as: (a) most companies don't have a high growth business model with a potential market size of US$ 500 Million, andThe vast majority of small businesses have more modest expectations. Their path to success lies in bootstrapping and small business loans at the right time. As Barry Moltz pointed out here on Small Business Trends, what's wrong with having a business that's only going to grow to $3 Million? UPDATE November 29: Andy Birol emailed me a link to his article on venture capital. His advice? Get customers to fund your business, rather than venture capitalists. |
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