What to Consider Before Accepting Venture Cash

Turn on the TV these days and you are often inundated with America’s obsession over the big payday and getting rich quick. Whatever happened to the American dream? Let’s look at the data. Over half a million startups get going in the U.S. each month. That’s a lot of competition. Many of them are chasing the big venture capital firm and angel investor dollar.

If you are in the small percentage of companies that actually get VC funded, you are in the minority. Most of the funding for startups comes from personal loans, credit cards and friends and family. Of those that do get funded, only a few of them succeed. So based on the statistics, most likely you’re business will fail. You will be in debt or owe your parents so much money you will be mowing their lawn until you get those AARP mailers.

You might be asking yourself, “Why do I keep hearing about VC firms and how they change the world?” The answer there is that you bought into the hype. VC firms make their money on hype. This is why you should think twice before giving up partial ownership of your business to venture capitalists.

From your idea to your team to your funding, take the power back. Build your business in a vacuum. Don’t concentrate solely on your existential path. In my business, I saw competitors charging too much in the moving industry. There wasn’t a solution for the consumer out there. I did more market research and found cheaper options for the consumer on various platforms, such as Groupon, LivingSocial and other moving companies that didn’t want the hassle with small markups. I stepped in between, charged a referral fee to connect the business and consumer and bridged the commerce gap. I turned that into a business model I could monetize and package. Focus on marketing and selling before you invest in any business to make sure you can make revenue quickly and then build your product. Before I start any business, I make sure if fulfills a need in the marketplace and fund it with money I have made.

Make sure you have just enough to get it going. Focus on revenue; not on getting funded. Roll up your sleeves, build the right team, and keep them close and interested. With this model, I’ve also found that the proof is in the pudding. If you are passionate, you can find a niche that works and makes money. If your team sees the end game and believes in you, investors will reach out to you. Typically, once I reach $25,000 to $50,000 per month in revenue, I either sell my businesses or get an investment in it. Make sure you have the power to make those decisions for your company.

All good things come to those who make money before asking for money. That’s how you do it right. And when you do it right, they always come to you (and you can take them or leave them).

John Daniel is a serial entrepreneur and expert in strategic partners, business development and marketing, with more than 20 years of business experience in technology, fashion, and transportation.

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