Let's Fix It: Entrepreneurship Does Not Equal Financing
I
am terribly irritated by the pervasive and continuously fanned
misperception that Entrepreneurship
equals
Financing.
It
doesn't.
Entrepreneurship
= Customers + Revenues + Profits.
Financing
is
optional.
Exit
is
optional.
The
media is reinforcing the myth. Business schools are reinforcing the
myth. And hence, they're setting up entrepreneurs for failure.
Too
Early
A
business can only become big if it can first get off the ground. The
problem with perpetuating the myth is that most entrepreneurs try to
raise money immediately and mostly bump around against solid walls.
Today’s
reality? Investors fund businesses that have already taken off, not a
slide deck or a business plan.
Too
Small
Most
businesses are just too small for venture capital. Unless you are
working on an opportunity that has a billion-dollar total available
market (TAM), VCs aren't interested in your business.
There
are, however, many more $5 million, $10 million, $20 million, $50
million business ideas out there. Those are perfectly worth building.
What
is wrong with building a $30 million annual revenue business that
throws out 30 percent profit every year?
Or
a $3 million one, for that matter?
Too
Slow
Most
businesses simply do not grow at an exponential pace. Most businesses
have linear growth curves, not hockey stick growth curves. There is
nothing wrong with a $10 million business that grows at 20 percent
year-over-year. VCs won't fund these businesses, but you can
bootstrap one with revenues and profits, and that is entrepreneurial
success, as far as I am concerned.
Over
99 percent of the businesses out there are not venture fundable
because they are either too early, too small, or too slow.
That
doesn't mean they are not viable businesses, and that you cannot be a
successful entrepreneur by building one.
You
can create value.
You
can create wealth.
You
can make a difference.
That's
success.
I
want to see the following changes in the entrepreneurial eco-system
of the world:
1.Entrepreneurs:
Please
adjust your mindset and define success not as financing or exit, but
as building a sustainable business that delivers value to customers.
You are being fed a bunch of crap, and you are swallowing it without
questioning flawed premises. Stop being idiots!
2.
Media:
Stop
being irresponsible fools. Stop parroting nonsense that propagates
and perpetuates a fundamentally harmful myth: Raising venture capital
equals success. Give bootstrapping entrepreneurs their due respect,
coverage, and platforms to grow. By only covering funding news and
funded entrepreneurs, you are making life extremely difficult for
those hard-working ones who constitute a much larger portion of the
global economy. You are ignoring legitimate businesses that have
revenues and profits, in favor of heavily funded speculative ones who
often have neither, and many never will.
3.Educators:
You
think entrepreneurship education entails teaching people how to raise
money. Wrong. Please adjust your curriculums. Better, first learn
what it takes to get a business off-the-ground. Hint: Not VC money.
By
the way, those of you who are turning your nose up and thinking, "Oh,
I am too ambitious to do a bootstrapped business" — you also
need a colonoscopy of the brain ASAP.
Let
me introduce you to
my
friend Girish Navani, CEO of eClinicalWorks,
a leader in the healthcare IT industry. Girish has built a $300
million business without a penny of outside capital. If he were to
exit, the valuation would be well above $3 billion. You think he
lacks ambition?
And,
a couple of more introductions: Greg
Gianforte, founder of RightNow
and Christian
Chabot, founder of Tableau.
Both raised gobs of venture capital. Both have built billion-dollar
unicorns. Both bootstrapped first, raised money later. At fantastic
terms.
They
went to VCs as kings, not beggars.
Once
more:
Entrepreneurship
= Customers + Revenues + Profits.
Financing
is
optional.
Exit
is
optional.
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