Forget VC Money, Fund Yourself...well, if you don't believe in your product to put your own money or time into it, how can you expect someone else to invest in it themselves?
I think this advice is somewhat misguided. I'm currently on my seventh start up. I started two previously myself with my own money, but my current employer is VC and angel backed. (I am the chief scientist) Relying only on your own resources such as credit card debt or a second mortgage on your home can be a very risky proposition.
Not just because you might lose your investment, but because by using your own money you are creating a situation of immense pressure. The risk of losing your home might lead one to make some bad decisions regarding the business. You have o be very careful here.
My second self funded company eventually did take about $100,000 in angel money. But we started with only $50,000 of the two founders own money and we operated the business for four years with no other investment. We eventually sold it to a public software company for $2 million dollars. This might seem like a pretty decent investment, but at the time (mid 90s) it failed to attract the buzz that seems to feed VC investments.
It also depends on how much capital you really need. Typically entrepreneurs underestimate this, but of course it is also possible to fool yourself the other way. You have to be very realistic about this to make the right decisions. My current venture requires us to installhardware in our customers' facilities, so it is somewhat capital intensive. Only someone who was very wealthy could self fund such an enterprise.
In the end VC money spends the same as any other money, so deciding where you get your funds should be a business decision similar to deciding who to hire or what product to develop. You should interview your investors as they interview you. But few entrepreneurs do this. They act desperate, and this often becomes a self fulfilling prophecy.
On another note, in my experience, entrepreneurs shouldn't expect most VCs to deliver anything more than money. Of course they all tell you about the benefits of their strategic connections and so on, but in my experience it is very rare that these bear fruit. One exception would be a venture fund targeting the specific industry you are developing your product for. These funds often do have real valuable connections to bring to bear and can help in ways that vanilla VCs can't.
I can't say I agree with you there. You might have missed the point a little bit.
Even if you are 100% passionate in your product and believe in it every step of the way, it doesn't mean that you can just put up your house to pursue it.
The fact that entrepreneurs seek backing is because it is exactly that -- more than just a check. You'll know that there are others in to share in your risk AND reward.
What we're discussing here is that getting turned down by investors should not discourage you altogether. If you believe you have something, you should see it through with your available means. But the fact that one cannot afford to bankroll the venture does indicate a lack of faith.
I think this advice is somewhat misguided. I'm currently on my seventh start up. I started two previously myself with my own money, but my current employer is VC and angel backed. (I am the chief scientist) Relying only on your own resources such as credit card debt or a second mortgage on your home can be a very risky proposition.
Not just because you might lose your investment, but because by using your own money you are creating a situation of immense pressure. The risk of losing your home might lead one to make some bad decisions regarding the business. You have o be very careful here.
My second self funded company eventually did take about $100,000 in angel money. But we started with only $50,000 of the two founders own money and we operated the business for four years with no other investment. We eventually sold it to a public software company for $2 million dollars. This might seem like a pretty decent investment, but at the time (mid 90s) it failed to attract the buzz that seems to feed VC investments.
It also depends on how much capital you really need. Typically entrepreneurs underestimate this, but of course it is also possible to fool yourself the other way. You have to be very realistic about this to make the right decisions. My current venture requires us to installhardware in our customers' facilities, so it is somewhat capital intensive. Only someone who was very wealthy could self fund such an enterprise.
In the end VC money spends the same as any other money, so deciding where you get your funds should be a business decision similar to deciding who to hire or what product to develop. You should interview your investors as they interview you. But few entrepreneurs do this. They act desperate, and this often becomes a self fulfilling prophecy.
On another note, in my experience, entrepreneurs shouldn't expect most VCs to deliver anything more than money. Of course they all tell you about the benefits of their strategic connections and so on, but in my experience it is very rare that these bear fruit. One exception would be a venture fund targeting the specific industry you are developing your product for. These funds often do have real valuable connections to bring to bear and can help in ways that vanilla VCs can't.
