If You Want To Attract Venture Capital, Don't Tell VCs Anything
from the we-need-money,-but-for-what-we-can't-say dept
The news that the micro-blogging/message service Twitter has attracted a round of venture capital funding has been greeted with the requisite back-slapping and congratulations, but also with some bemusement by folks wondering what the company's business model is. Even the investors, Union Square Ventures, don't know yet, and say the investment will go towards making Twitter "a better, more reliable and robust service." Paul Kedrosky offers an interesting take on the matter by saying that for companies looking for VC money, business plans and profits are overrated. He contends that offering VCs a detailed business plan only gives them more things to nitpick, while early profits can overinflate their expectations, so it's better for a startup looking for cash to go light on both. It's easy to take his point to an extreme and say it's yet more evidence that we're in another bubble, but Kedrosky really seems to be saying that startups shouldn't pitch their detailed plans to VCs, and not that they shouldn't have one at all. Of course, regardless of whether you have business plan or not, if you can grab the traffic and attention of something like Twitter, there will be plenty of VCs ready to open their wallets, either as a vanity investment, or because they know they should be able to flip the company to a bigger buyer pretty quickly -- much like Union Square did with a previous investment, the social-bookmarking service Del.icio.us, which was later bought by Yahoo.
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Filed Under: startups, vc
Companies: twitter, union square ventures
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hmmm....
- Discover new Indie Music .. DiscoverOurBand.com
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if that doesn't describe twitter, write a better one.
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#2 Wins Toaster
Seems to me that web businesses without a business model = web 1.0. I guess people have forgotten the bubble? [Matt shakes head]
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Driver's seat
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If You Want To Attract Venture Capital
I am delighted to find this article.
You are absolutely right.
"The-less-is-better" psychology should be the best approach because the less information the VCs have about a company, the less they would be able to control the company.
My company plans to begin private fund raising campaign for $2 billion in a few months, to finance a new start-up company and it has decided not to accept even a dime from the VCs.
I have heard enough horror stories about them to stay away from them.
Ikey Benney
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