Flight Path of the Startup

The decision to launch a startup, or to join a nascent startup is often taken with too little forethought. Just knowing that your idea is great, or that you’re ready to be your own boss, or that you are dedicated and tireless and hungry is not eno…

 

The decision to launch a startup, or to join a nascent startup is often taken with too little forethought.  Just knowing that your idea is great, or that you’re ready to be your own boss, or that you are dedicated and tireless and hungry is not enough.  You need to be so committed that you are really willing to risk everything.  The Risk versus Reward curve for most VC’s or halfway competent Angel Investors is

HIGH RISK = HIGH REWARD ; MANY SMALL FAILURES = A FEW HOMERUNS

But for the Entrepeneur, or the Founder it’s most likely that the equation is

HIGH RISK = SMALL REWARD; MANY LARGE FAILURES = MANY LARGE FAILURES

This MUST READ Tech Crunch article by Guest poster Mark Suster really says it all, in vivid detail.  If you are a Wannapreneur, please read ahead.

UPDATE:

I learned this lesson long ago – many investors wait until you’re staring at a cliff before committing whether to re-invest in you. It is risk minimization + maximum leverage. I swore never to do that as a VC. Many VCs don’t realize just how destructive this is to team spirit and confidence. Penny wise, pound foolish.

– Mark Suster

While this is absolutely TRUE, and I have experienced it myself, I would add a counter argument told to me by a successful VC (paraphrased)

Every Entrepreneur we deal with tells us that their sack of shit product is going to go HUGE next week, has budget forecasts that resemble something from Alice in Wonderland and honestly looks you in the eyes and lies to you every day when you ask reasonable questions; they lie.  They just plain lie; and they do so because they’re lying to themselves.  They wouldn’t be doing a start up if they didn’t do that on a daily basis.

– Anonymous successful VC

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