The world’s venture ambitions will not be fulfilled by enough early-stage venture capital (VC). However, these hopes might be misguided due to the hype and myths of VC.
There are many holes in VC which need to be plugged.
* VCs finance very few ventures and only a small number of them succeed. While VCs only finance around 100 ventures out of 100,000, they are selective. They fail to fund about 80. Only one (HR) is a homerun.
* Very few VCs add value. It is believed that the top 20 VCs make most of VC profits as they support the majority of home runs. The rest are not as profitable. Silicon Valley has the most top VCs because there are many HRs there.
VCs could be more expensive than they add, especially if you get VC in a hurry.
* Professional CEOs can replace you with VCs, which could cause you to lose control over your venture.
* VC doesn’t always follow angel capital (AC). About 90-95% of people who get AC don’t get VC. They have to start with little money.
* VCs will fund after Aha (i.e., after evidence of potential). Aha could be Aha (after the technology’s promise is apparent), strategy Aha and entrepreneurial leadership Aha.
Entrepreneurs who want to grow need to fill the VC holes. Eighty-seven billion-dollar entrepreneurs (BDEs) took their ventures to the next level, achieving more than $1 billion in sales and value.
*1% received VC after technology Aha was completed and were made CEO
* 5% of the CEOs were given VC following strategy Aha
* 18% of the population received VC upon take-off, evidence of leadership Aha, and remained CEO.
* 76% avoided VC
It is believed that entrepreneurs need VC to succeed. Reality is very different. More than 9/10 BDEs took off without VC and controlled their venture and the wealth created. Entrepreneurs seeking growth with control can learn from these unicorn entrepreneurs.
Here are five secrets.
#1. Entrepreneurs have primarily created unicorns by following emerging trends.
* Jeff Bezos jumps on the emerging Internet trend to defeat the established giants of book retailing.
* Bill Gates used computer technology’s emergence to defeat the titans of the mainframe industry.
* Steve Jobs used his smartphone to revolutionize the music business.
* Travis Kalanick (Uber) used his smartphone to revolutionize transport.
#2. Competent movers are more important than that first movers with product innovations.89% failed or failed in their first moves. Unicorn entrepreneurs (BDEs and hundred-million-dollar entrepreneurs) mainly succeeded by exploiting first-mover flaws. Steve Jobs used this first-mover weakness to make music downloading legal on the iPod. He also made the iPhone a global platform of apps. Page and Brin optimized Google’s search engine to launch Google. Kmart’s neglect of rural markets was an opportunity for Sam Walton. Zuckerberg focused on universities to beat MySpace.
#3 Capital-smart strategies are more critical than capital-intensive strategies. Capital intensive is required for the VC approach to growing more with less. Capital-smart is the unicorn-entrepreneur approach, which allows you to produce more with less. Michael Dell made his fortune by selling direct to customers, who paid him in advance. Mark Zuckerberg was focused on universities to grow with less. Bill Gates utilized a strategic alliance to help him grow more quickly with less. More than 9/10 unicorn entrepreneurs took off with capital-smart strategies by developing more with less.
#4 Reverse-VC is even more important than VC. Only 1% of unicorn entrepreneurs got VC after product innovation. Reverse-VC was used to achieve Strategy Aha or Leadership Aha. Or to avoid VC while remaining in control.
* Sam Walton used cash flow and leases, vendor financing, development finance, and cash flow (government)
* Dell used vendor credit and customer payment. Niraj Jain, Wayfair also used customer payments and vendor credit.
* Bloomberg formed an alliance with Merrill Lynch for the creation of a large company.
* Steve Ells used family finance, leases, and cash flow to build Chipotle.
* Bob Kierlin, Fastenal: Link business and finance to grow at 30 percent per year using cash flow
#5. Capital is not as important as skills. Nearly all BDEs utilized skills and smart strategies to get off the ground without VC.
* 5% of BDEs were awarded VC after proving the viability of their unicorn strategy. CEOs replaced them, and they only retained 7% of all wealth.
* 18% were awarded VC after proving that they had a unicorn strategy and demonstrated leadership potential. They also remained in control. This group, which includes Zuckerberg and Bezos, also kept 16%.
* 76% (including Bloomberg and Dell) avoided VC and kept 52% from the wealth created.