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Gagan Goyal

12 Feb '19
Accidental VC Entrepreneur
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Founders raising money from Venture Capitalist without giving thoughts on why they are into Entrepreneurship

The recent article in NYTimes titled More Start-Ups Have an Unfamiliar Message for Venture Capitalists: Get Lost started a debate in startup community on Twitter and Whatsapp, with some even declaring war against VCs. Citing instances from the article where businesses are churning 100Mn+ in sales without venture funding. Then again, some mulled that bootstrapping alone cannot fuel a business to become an unicorn success like Flipkart, Ola or Google.

Multiple viewpoints were flying around which triggered me to write this post (those who missed the earlier one — please read it here ) to share my views on when entrepreneurs should look towards raising Venture Capital and when to dismiss the option altogether.

To begin with it is not a case of one vs. the other. Bootstrapping or building via VC capital — both bring their own pros and cons. Weighing out the benefits against the challenges is always the choice and prerogative of the entrepreneur.

Since entrepreneurship is such a personal journey, a question entrepreneurs need to ask themselves from time to time is — “Why am I opting for entrepreneurship?” Only when you have established the reasons behind your efforts and why are you attempting to get into it, what will it solve, the impact you want to create in the world or for yourself, only then can you arrive at the best approach ahead to accomplish it.

Knowing the WHY will lead you to HOW

The entrepreneurial journey is not an easy one. It must be fulfilling, rewarding and most importantly — deliver happiness. If the sweat and toil of building your business will not help you derive personal satisfaction and happiness, you might not be able to steer it over the humps and through the slumps.

So, have your “Why” answered and keep re-visiting it over the course of your entrepreneurial journey to determine what best fits your current vision. 
 
The reasons you derive this personal sense of fulfillment and happiness from your business could be anything:

  • You want to be your own boss and call the shots
  • You want to create your own environment, small group and set your own rules
  • You are driven by ambition to build a large enterprise and be the CEO
  • You want to bring disruptive change in the market or explore new markets with your innovative ideas
  • You desire to be rich and financially successful
  • You want to create a social impact
  • You want more flexibility and the 9 to 5 grind is not for you
  • You dream of a good life where you can make sufficient money and spend quality time with family and friends
The answer to why you are on your entrepreneurial journey could be unique to you and can shift as you walk down your chosen path. However fluid it might be, a continuous assessment of “Why am I doing this” to establish what is currently driving you will help bring focus to what your next steps should be.

Often times the more action-oriented, solution-finding, fire-fighting side of the entrepreneur is at the helm of affairs and this inner contemplation is dismissed.

For many entrepreneurs — shifting focus from this core intent behind getting into entrepreneurship can make the vision blurry and trigger them on to make hasty decisions in order to start the business or attain quick growth. This leads them to raise capital from VCs to put into their business, without giving the decision as much contemplation as it deserves.

Many stalwart VCs, including Bill Gurley, believe that Venture Capital is not a suitable for all entrepreneurs, being more of binary “swing-for-the-fences” exercise for those wanting to — Go big or Go home.

A VC hook-up to “Go big” comes with far more strings attached which the entrepreneur might not be ready for. Outcome of such unconscious decision of going via VC capital route is disadvantageous for both the entrepreneur as well as the VC, such entrepreneurs I call Accidental VC Entrepreneurs.

To avoid being an accidental VC Entrepreneur, evaluating the ground realities of Venture capital raised companies is essential to determine if you are up for the expectations that lay ahead:

  • Aiming to grow the company in valuation to minimum $1.0Bn
  • Achieving this growth in 6–8 years
  • Choosing growth over profitability
  • Agile and fast in execution
  • Increased answerability to your board and shareholders
  • Chalk out an exit route for your financial investors
  • Be aware that historically, the probability of making good personal wealth is less than 1% for VC funded companies

If anything on this list runs contrary to your truth of Why you are in business and what you derive most happiness from, then maybe this road isn’t for you and you should avoid getting on the VC Capital route to avoid being an accidental VC Entrepreneur!

One of our close Chinese VC friend, Morningside recently shared a piece of advice for Indian founders — Indian founders are not as ambitious as Chinese.

This post was written By Gagan Goyal for Medium.com & appeared in the daily on 11-Feb-2019

 

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Copyright: gagan@indiaquotient.in
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