Entrepreneurs: think twice before taking advice from venture capitalists

May 14, 2012 by Joshua
in Entrepreneurship, Tips

I wrote the following after reading this article from a venture capitalist giving advice to people thinking about starting companies.

A lot of advice VCs give entrepreneurs seems to me versions of “make my job easier,” like how to write a great business plan, how to pitch, etc. In this case, I see him asking entrepreneurs to improve the signal-to-noise ratio so he can have an easier time funding companies. Nothing wrong with trying to make your life easier, but he makes the article look like he’s helping the entrepreneur, when he’s writing it to help himself, discouraging some would-be entrepreneurs who might love starting a company even if it didn’t make a VC money. For an entrepreneur who makes their business their life, leading the company may be its own reward, making his advice meaningless, since he’ll call it a success only if it generates a return on investment.

At the very least, I’d appreciate the article more if he specified “Think twice before starting a company that might seek venture capital funding.” Most entrepreneurs I know never approach VCs. Did he forget few companies involve technology at all? His advice doesn’t apply to them. Well, except that thinking twice is obviously good advice to anyone, but his reasons for it.

Entrepreneurship is far greater than starting tech companies looking for VC. I’d be wary of an investor who didn’t realize he put himself in such a bubble. With all that name-dropping, you can see how social bubbles can contribute to investment bubbles.

If you love starting companies and you have an idea whose time is now, you’ll find a way to start your company. If you don’t need venture capital, hopefully you won’t hear his advice in the first place, or will realize it doesn’t apply to you. Even if you do want VC, if your firm eventually dies but you loved doing it and it helps you do better on your next one, it seems to me you’ve succeeded.

I read other posts at that venture capitalist’s site. The next most recent one he wrote did the same thing — giving “advice” to make his job easier. One by another guy at the same firm did the same thing too.

Strangely, both use the phrase “a lot of ink has been spilled over…” They also keep reusing their teammates description of what they are looking for, from a post which ends with the biggest “advice” to make his job easier (also spelling “prove” “proove” in one of the main points): “So to all you who are entrepreneurial equivalent of Tom Brady… the #199 draft pick, not the famous one of today… please give me a call when you start your first company.” Please make my job easier!

There is so much more to starting companies than getting venture capital. I used to live in that bubble, having started my first business in the late 90s, thinking the VC route was the only way to start a company.

I’ve since realized how much more variety there is in starting companies. I wrote recently about how much entrepreneurship I saw on the streets of Vietnam, where the number of businesses per mile on the streets far surpasses what you see on the streets of New York.

I’ve also since realized how much more joy you can create for yourself in starting companies when you do it for the right reasons for yourself — for me, loving what my company does and the people I work with. If you have to jump through a venture capitalist’s hoops, you have to, and, of  course, making their job easier will help you and them. But few companies need their funding, and finding ones that make your job easier may help you more, if you start one of them.

As for venture capitalists, by all means, I don’t see any problem with advising entrepreneurs how to make your job easier, especially if it helps make their lives better too, but I wouldn’t imply you’re just helping them. I’d write a post, “How to make my job easier (to help you)” or something like that. But then keep in mind, you’re probably helping them make every investor’s job easier, which lowers your value.

You’ll probably help yourself most by figuring out how to make their jobs easier. How can you help them?

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