Aug 062010
 
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I’ve always been quite surprised by the percentage of entrepreneurs who think the way they will grow their businesses will be through raising money from venture capitalists.  For most companies, nothing could be further from the truth.  Venture capitalists look for very specific types of companies, almost always based on some sort of proprietary technology, run by a stellar (not just good) management team with an impressive track record, with a very large potential addressable market.  VCs have these criteria in place because they correlate to ventures that are successful and have a reasonable probability of hitting the return on investment targets VCs have.  A very small percentage of companies get funded by venture capital – a single digit percentage of the companies that VCs look at, and a much lower percentage of companies that submit business plans to VCs get funded, and a yet lower percentage still of the overall population of companies attract capital from VCs.  For most companies, the bottom line is that VCs are not interested, and quite frankly, most company owners probably should not be interested either.  Before you invest considerable time and other resources into pursuing venture capital, you should take a look at the websites of a few VCs and click on the link that says “portfolio companies”; unless your venture closely resembles the types of companies in the VC’s current portfolio, you should spend your time seeking financing elsewhere..

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