The essential venture capital – Day 74/139

I just read a great article by Anthony Ha about the web startups and their need of venture capital. He quotes venture capitalist Randy Komisar who says his money is not for the web startups.

But doesn’t a startup need money to develop the next big thing?

I agree with Komisar. If you’re building something great on the web, money is one of the last things you need. Why would anyone trust a person/team who is incapable of developing a simple website with their own money?

Obviously no one should. The best part is that this really helps both parties enormously:

  1. The business angel avoids the huge unnecessary risk related to investing in an early-stage website idea. Websites do have about 99.9 % track record of not becoming business at all.
  2. The team would be stupid to sell a part of an idea that they believe in themselves. The later the stage of development the better terms they can negotiate with the angel.0 If the team can prove their idea works in smaller scale, there is a chance that someone believes it can be scaled up. Money works pretty well for that purpose.

So if you’ve concluded that money is the only thing stopping you from making a great new website, think again. Big corporations have truckloads of money and still they rarely achieve anything remarkable on the web. Just do something remarkable first and the money will follow.

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2 responses to “The essential venture capital – Day 74/139

  1. I’d say that there’s a difference between needing money and it being useful. I think that usually especially for the web startups the real constraint is time (weather they’re able to develop and iterate fast enough) and that time really equals to money 🙂

    • You’re right about the constraint of time. Time is funny, because it’s relative. Nobody has a lot of time for average things. On the other hand if you’re making the biggest thing after Facebook, you suddenly have a lot more time available.

      Motivation will show in the priorities. The projects itself sets the team’s motivation at a certain level. Money might affect the level a bit but will never be the only factor.

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