Venture Capital Not Required
This post is for all those entrepreneurs who are building great businesses, but have no need or interest in venture capital. Given all the emphasis on venture capital from pundits, startup mags and regional entrepreneurship organizations, it’s easy to lose sight of the fact that venture capital isn’t a requirement for building something great. In fact, many of the best entrepreneurs in the world never step foot on Sand Hill Road or similar VC hotspots across the globe.
I met with one such entrepreneur last week and was impressed with all he has accomplished with credit cards and cash flow. He has big plans for next year, probably doubling or tripling his business. I see plenty more opportunity with the addition of smart capital, but I tried to restrain myself. My focus on building $100 million+ to $1 billion+ businesses comes too natural/narrow from being a VC, and sometimes you have to sit back and appreciate the handywork of an entrepreneur who is content and proud of building his $10-20M vision.
Whether your business is in services, food, entertainment, real estate or any number of unlikely spaces for VC, take comfort in what you’ve built and don’t change your vision just to match what other people say you should do. Build what feels right, change some people’s lives along the way, and if the high growth nature of venture matches your goals then give me a ring…
I met with one such entrepreneur last week and was impressed with all he has accomplished with credit cards and cash flow. He has big plans for next year, probably doubling or tripling his business. I see plenty more opportunity with the addition of smart capital, but I tried to restrain myself. My focus on building $100 million+ to $1 billion+ businesses comes too natural/narrow from being a VC, and sometimes you have to sit back and appreciate the handywork of an entrepreneur who is content and proud of building his $10-20M vision.
Whether your business is in services, food, entertainment, real estate or any number of unlikely spaces for VC, take comfort in what you’ve built and don’t change your vision just to match what other people say you should do. Build what feels right, change some people’s lives along the way, and if the high growth nature of venture matches your goals then give me a ring…
Labels: vcfaq, venture capital
Posted by VC Dan | 10/25/2007
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Comments (6)
Amen, Dan.
Having gone both roads (taken VC money, and pure bootstrap), I think it as much comes down to what the entrepreneur needs for themselves. Some folks are homerun hitters (and *need* to work on the billion dollar business). Other guys (like me) prefer to hit base runs, multiple times.
Does that change over time or with the business? Maybe, but i think at least part of it is inherent in the enterpreneur's personality.
Yep Eric...different strokes for different folks...
Refreshing Dan
Glad you can see both sides. In fact I recall from a article I read a while ago, more than 50% of successful companies (even in tech) had been founded without any Venture capital.
Mukund
The choice seems to lie between limited capital and borrowing ability and credit card debt at 30 percent interest per year, versus a venture capital set-up that appears to be about 50 percent theft, 30 percent fraud, 10 percent fake, and 10 percent "mezzanine financing". For instance, we now have a political candidate running for the White House whose venture capital outfit, Bain, just bought out the partners at Outback Steakhouse for a few hundred million apiece. That little "venture", entailed investing "risk capital" in what is now a chain that has been in business for 20 years, has several hundred franchises, each seeing a million or more in cash flow each week, and tens of thousands of employees on its payroll, including thousands of directors, managers, accountants, lawyers, and chefs all earning well over six figures per year. This happened right here in this state, and along with Bain, Raymond James's VC outfit, Ballast Point Partners also held a major stake in this undertaking. This one deal probably accounted for about 50 percent of Florida's "venture capital investments" this fiscal year, as reported in the financial press.
Well, if that is "risk" capital, that makes an investment in my company, North River Energy, look like bungee jumping off the Sunshine Skyway without a rope, here. So, rather than argue that point with another 100 idiotic, untrained, and completely overpriced VC outfits, it turns out to be easier to bite the bullet on those 30 percent Mastercard monthly charges. James Carrow
@Mukund: yep, I'd wager it's closer to 80% of successful companies never raised institutional venture capital. Does that mean ignore VC? No, but it's not required to build great companies.
@james: I'm not sure which bucket you have me in, but rest assured there are early-stage VCs out there looking to get everyone on the same side of the table and build value together.
I would note that I believe Outback used earlier venture capital to build their business beyond what would have been possible otherwise. The recent Bain deal you mention sounds more like a PE/BO deal, rather than true venture capital. Large multi-billion $ entities like Bain have funds for various purposes, some venture some not. They're true early-stage efforts are much smaller dollars, plus they're a founding investor behind the Village early-stage venture network that includes my fund.
There are a lot of successful businesses that don't need/can't get venture capital. But I think all entrepreneurs must ask themselves the question "what would more capital do for my business?" at some point.
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