Fred Wilson’s post amplifying Jeff Nolan’s post about the “broken” VC model says about venture capital investing what I was trying to say about angel investing at Ignite Boulder. Both made the point far more eloquently than I did, even though I was given five minutes. My point at Ignite was that most (the vast majority) of angel investors will never make any money by doing it. It’s hard (and takes alot of work) to be in that group of 10-20% of angel investors who do make money.
I’m in Toronto today speaking at Canada’s startup conference, Startup Empire. My presentation is called “Boulder, Techstars, and Why Venture Capital doesn’t have to matter.” In general, I think that entrepreneurs put far too much weight on the availability of venture capital. Worse, they put too much mental energy into it. I’ve been pitched many ideas over the last 3 or 4 years that always start with “get venture capital”. These business plans fundamentally depend upon venture capital (even prior to collecting underpants), causing many of them to never even get off the ground. The availability of venture capital cannot be your barometer.
My presentation in Toronto today argues that (based on raw data) it’s mathmatically 100 times harder to raise venture capital in Toronto than it is in tiny little Boulder, Colorado. But my point is that whether your chances are 0.5% or 0.005%, does it really matter? Are you really going to focus your efforts there unless you have some of the things that improve your chances dramatically, such as a track record or a truly-world changing technology?
If you’re a first time entrepreneur with no big wins under your belt and no special relationships, it’s time to stop deluding yourself. Focus on your product and your customers, not venture capital.
Don’t let the down economy stop you from starting a business right now. That’s an excuse, and entreprenurship is about breaking through excuses. Sure, it’s hard to raise money from VCs (it always has been) and it’s also hard to raise money from angels (and it always has been) and it’s hard to build a business from the ground up (and it always has been). It always will be, but you can do it.
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