VC Business is not a game for everyone
Investing in a successful company is like winning lottery for a VC.But most VCs may tell you only one success out of a hundred failures. If you invest into a start-up just by a beautiful business plan or the good impression of the entrepreneur, you may end up with failure with 99% chance.
Welcome to VC losers club if you don’t understand the complexity of an organization and the process to be successful.
A business has to go through these steps in order to success:
1. Get product idea: it could come from entrepreneur’s “genius” idea or market analysis/feedback or side product of existing product, but too much VCs fell into other people’s good recommendation.
2. Raise fund: could from 3F (Family, Friend and Fools), connections with VC circle, crowdfunding or fair launch (new trend)
3. Organize people: find and recruit the talent minds is a big challenge to a start-up. Setting up a company and hire a talent team is a standard way but becomes harder, time consuming and high cost.
4. Build product or service: a product from zero to mature requires a long time which may drag a start-up to death. Open standard, open source, composability can help start-up speed up in releasing new product.
5. Market and sale product: too many products failed due to bad marketing and sales, or find out the product does not have any market after release. Bundling product idea and marketing, or product ideas from customers themselves is show its merit.
6. Tax and regulation: success in products but failed on paper is a pitfall for start-ups. It could be wrong accounting practice, not meeting jurisdiction requirements and a lot more than an entrepreneur may have foreseen.
Any one of the above fails in a business will lead to a total failure. As a VC, it is almost impossible to know all these factors at early stage of a start-up.
More open, we see VCs are using a more practical way to handle these issues which is called “helping” start-ups to go through these periods. To do this, a VC needs to be an experienced entrepreneur who has gone through all these pitfalls.
What about if we could change the way how business is operating? Or, break the basic components of a business and re-assemble them again to ensure a high success rate?
Sure, we are now doing this with new fair launch business model.