2 suggestions for bridging the gap between real boot and VC boot
A rose by any other name is always a rose, but when is a startup company really a startup?
Is it a startup when a business is just an idea and nothing else, or is it when an entrepreneur has developed a product, such as a cure for cancer, or is it from a 6-year-old company that has 10 banks and 25 FinTech firms as clients, has over 750 employees and has just received Institutional Venture Capital (VC).
Trade publications seem to have jumped on the bandwagon to call every VC-funded business a startup, even though they have a valuation and revenue of billions. The problem with this practice is that it can trick entrepreneurs into thinking they can get venture capital when they only have an idea, a business case, and hope.
When I reported it to a respected journalist, he agreed with me. Is it time to bring the truth to journalism – and, therefore, to business development and entrepreneurial education?
The reality is that it’s usually not entrepreneurs, but VCs and the media that call VC-funded companies “startups”. Entrepreneurs often want to show how advanced their companies are in obtaining clients and / or capital (the “fake it till you make it” syndrome), and VCs seem to want to position themselves as shrewd risk takers. What is the logic of the media?
It would be great if the media did a better job of pointing out that VCs are very selective and need a way to determine potential, so they invest after proof of potential ie, Aha! This suggests that entrepreneurs know:
That they are unlikely to get VC before Aha because people cannot see the potential before Aha
That winning a pitch competition does not equal proven potential
That more unicorns are built with skills and not opportunities as most opportunities can be emulated
That getting venture capital is not business success – creating and keeping wealth is, and
That over 9 out of $ 10 billion entrepreneurs took off without VC – they used smart skills and strategies to bridge the VC gap from idea to Aha and kept control of their business and wealth that they created.
Here are two suggestions for the development of the company:
1. Start with a common definition of a startup. To be credible, business journalists need to define something as basic as a “startup”. A common definition will help entrepreneurs know where they are at and that they need to go to Aha if they want venture capital. Perhaps we can define a “real start-up” as a company with an idea, a plan and a product ready to sell – without a sale yet. This would assume that the research and development is complete and the company is ready to start selling the product. And a “VC startup” could be every time a VC invests.
2. Push business schools to help all entrepreneurs access Aha based on their skills, not promote pitch competitions for real startups. Pitch competitions assume that the experts can pick the “winners” before Aha. But it’s hard to pick the winners before Aha. Even the top ranked VCs like Bessemer Ventures rejected unicorns like Google and Airbnb before Aha. B-Schools can be more effective if they teach the right skills that can help real startups. Then instead of “beauty pageants” for the best pitch, they can promote skills competition to present entrepreneurs who prove their skills to start growth businesses. Skills competitions can benefit more entrepreneurs than the current system where winners are often chosen because they appear credible, have the right pedigree or gender, or have been admitted to highly ranked schools.
Let’s democratize high potential entrepreneurship by teaching and promoting skills to help entrepreneurs bridge the gap between VC and VC-startup.
MY TAKE: The habit of calling VC investments like startups can be misleading for entrepreneurs who mistakenly think VCs normally fund real startups before Aha. Can business journalism be accepted as credible when there is no common definition for something as basic as a “startup”? This can be important because VCs want proof of potential ie Aha, and entrepreneurs need to know how to get to Aha from a ‘real’ startup.