Ivy League Professor & Former Venture Financier Dr. Dileep Rao Suggests "Truth-In-Venture Capital" Act
MINNEAPOLIS, Dec. 20, 2018 /PRNewswire/ -- Based on the headlines touting venture capital home runs, it is easy to believe that all angels and VCs succeed, and that everything they touch turns to gold.
Our society is caught up in a venture capital bubble. As with the bitcoin bubble that is popping, breathless pronouncements of sky-high funding rounds will eventually come back down to earth.
To take advantage of this VC cornucopia, entrepreneurs attend pitch contests where self-styled experts present opinions of their pitch, or watch TV shows where experts make predictions on what will succeed. Additionally, many universities and business schools add to this mad rush towards VC by blindly following the VC-driven, top-down model.
Maybe it's time to enact a Truth-in-VC act. This is only partially tongue-in-cheek because erroneous thinking around VC is affecting academia, entrepreneurs and governments.
Dr. Dileep Rao's ground-breaking study of unicorn entrepreneurs who built billion-dollar (in sales and valuation) ventures from scratch, as described in his book Nothing Ventured, Everything Gained, shows that there are many myths surrounding the VC model.
The major myth is that entrepreneurs need VC to take off. The reality is that 94% of America's most successful entrepreneurs took off without VC and 76% never used it.
The Truth-in-VC Act will have many benefits.
It will free VCs from living a lie. Instead of pretending to read the future in a business plan, they can admit that they wait for proof of potential, and that pitch contests and most ideas are meaningless because most ideas can be imitated. It is the execution that matters. Jobs, Gates, Dell, and many other unicorn entrepreneurs imitated. They were all fantastic entrepreneurs.
It will help entrepreneurs to know that:
1) Only about 20 VCs make about 95% of the profits in the VC industry. And these 20 are mainly in Silicon Valley (in the U.S.) because that's where the home runs are.
2) Entrepreneurs should not seek VC till Aha when the venture's potential is evident to everyone. Mark Zuckerberg's skill in building Facebook was not evident when he first started. It became obvious when he started getting millions of Facebook users from America's universities.
3) Entrepreneurs need to acquire skills to obtain seed capital and to use this meager capital wisely, rather than waste time seeking VC before Aha.
4) The only capital entrepreneurs get may be from "family, friends, and fools" (as some VCs call it) and their goal should be to grow with this limited capital and keep control. To do this, they need to know how to be finance smart and grow with less.
For more truths about venture capital, see "The Truth About Venture Capital." It is free at www.dileeprao.com.
Media contact:
Sarah Wilson
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518-637-4326
SOURCE Dileep Rao
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