Do you think venture capital is your best option to help your business grow? Think again.
The following is guest blog post from Dallas Summit speaker John Mullins.
We all know what the conventional formula for entrepreneurial success looks like. You come up with a great idea. You write a business plan and raise a boatload of money. You execute flawlessly and…ta-daa!…you’re rich! But that’s an outdated formula.
Why should you avoid venture capital if at all possible?
Here are three reasons why you might not even want to take VC:
1. Raising capital is a full-time job. But so is running your company. Raising capital can and will distract you from your primary focus, and will take your eye off the operating ball.
2. Because venture capital investing is risky business, such capital comes with onerous terms. You won’t any longer be in control, regardless of the stake you give the VC, and you won’t like the terms, guaranteed.
3. You may not need or even want the “advice and support” you will be promised by your VC. Venture capital investors don’t necessarily add value to their portfolio companies, although some clearly do. Fact: Many VCs, especially outside Silicon Valley, have never actually built an entrepreneurial venture themselves. And most of them deliver no better than single-digit returns to their investors. With this kind of track record, do you really want the “advice” they’ll encourage you to take?
But “Is there a better solution?” you ask.
Indeed, there is a better way – five of them, actually – to get your hands on the cash you need to start something new or to finance and grow your current business. It’s what Michael Dell, Bill Gates, and even Banana Republic’s Mel and Patricia Ziegler did to start and grow their businesses: customer funding. To learn about the five inventive approaches to customer funding that scrappy and innovative twenty-first century entrepreneurs – people like you – are putting to use, come hear me speak at the upcoming Fortune Growth Summit in Dallas Wednesday, October 21st. After hearing my remarks, you, too, may say, “Who needs investors?”
John Mullins is Associate Professor of Management Practice in Marketing and Entrepreneurship at London Business School. His latest book is The Customer-Funded Business: Start, Finance, or Grow Your Company with Your Customers’ Cash (Wiley, August 2014), from which this post has been adapted.Posted by: admin