Today I read the following from one of my bright students. He is from Singapore and is in Silicon Valley working in a startup as an intern and taking classes about entrepreneurship. This is from the interview of his startup CEO who was commenting on the pros and cons of taking money from venture capitalists: "Many a time you pitch your prototype to the VC for more than just the money. A good VC could mentor your solution to a much higher level by bridging the gaps with his experience and contacts. A great VC gets to see the big picture of the industry and hence is in a better position to foretell the direction of the market. Sequoia played a significant role in getting Goggle to acquire YouTube, being on both boards. But then again, they could impede your dreams to go IPO and push for acquisition as an exit strategy. hence it is important to weigh the factors that will decide the need for VC funding."
That is a realist talking to a student studying the process of converting an idea into a world-class enterprise. Note carefully the pros and the cautions from the CEO. Then apply that to your dream.
- Are you ready to turn your idea over to VCs and follow their instructions?
- Have you found VCs able to work with you to execute your plan for your dream?
- When are you ready to sell the company? Are you determined to get only to IPO?
- Do you have the courage to abandon your dream and pursue one more practical (if that reality emerges)?
Those are some of the ways to probe your soul and discover how realistic you are about your dream. Asking such questions now can save you agony later. Most dreams pop when competitive forces attack. Then realism emerges and is what you have to work with. Experienced VCs are realists. They are not all bad. And for sure, they are not dreamers. They can be very optimistic, bold and determined, but they became experienced, even great ("icons") because they were realistic about the dreams of entrepreneurs.
BOTTOM LINE: Examine your dream for your new enterprise before seeking VC money. Then you will know what to look for besides the money. Some day your dream can come true and emerge as a working company. Then you will want by your side realistic people helping you manage the business, finance it and convert the dream into a fulfilling success. When you understand that, you will be well on your way to building an unfair advantage.