Why venture backed companies fail
The Web 2.0 Ireland blog points to a brief but hugely informative post on Why early stage venture investments fail
The money quotes:
Most venture backed investments fail because the venture capital is used to scale the business before the correct business plan is discovered. That scale/burn rate becomes the cancer that kills the business.
I should also say that for businesses that don’t have the benefit of venture capital backing, the reverse is probably true. Almost certainly non-venture backed businesses will not have the ability to get too big too fast. They will mostly fail because they have the wrong business plan and they don’t have the wherewithal to survive for the period of time it takes to figure out the correct one.
I wonder is there a lesson here for agency-backed research projects also?
December 1st, 2007 at 10:53 am
Well, I disagree. In my personal experience – as an entrepreneur, having gone through venture funding a few times, I have to say that most often the vulture (sorry venture) guys are too greedy. You know that you need, let’s say, 2 million. They say yes, but at the end of negotiations say we’ll give you 200k to start with and see how it goes. That means that the business plan, that they agreed to, is not viable.
You cannot get a river from droplets, although both are made from water.