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I'd be as honest as possible. Entrepreneurs need to develop thick skin as early as possible.
I'm in the process of setting something up but I'm isolated in so far as I don't have any immediately obvious people to partner with.
My idea is unpatentable and hence would be easy to steal. I feel like I'm in a catch 22 situation. Trust is a major issue for me at the moment.
As soon as I see a VC or angel they could just steal the idea, be the first mover, and essentially screw me. My problem is acquiring funding. I'm a student and have no previous experience. The start-up world especially for the industry I'm looking to enter is typically comprised of people who have experience in the industry.
So basically if I get turned down, I could also lose the idea I've been working on for a year and a half.
Any advice?
Thanks for being so honest with how you are feeling about your idea. I had similar fears a few years ago when starting my company, so I'll just give you the advice that some great mentors gave me.
VCs are not going to steal your idea. Think about it, VCs meet with hundreds of companies a year who are executing ideas. That's the VCs role: to find the ones that interest them the most with a great team and invest money in the team.
VCs don't have time to steal the idea. And even if they did, can you imagine how quickly their reputation as a valuable investor would be tarnished if they stole an idea? It's just not going to happen. VCs dont need to steal your idea. And just to keep you humble, there's a 99% chance that your idea isn't as good as some of the others they see. Not because it's not a good idea, but they see so many people with amazing ideas.
I can't speak for angels because that word is thrown around a lot. For them, just do some due diligence. If they have a good reputation, they wont steal the idea either. It's easier (and probably more satisfying) for them to invest in you to execute the idea than for them to do it themselves. But again, "angels" can kinda be anyone these days, so I can't guarantee anything there.
My advice would be build a team. Focus on finding the right people to help you execute and then get a prototype in the hands of users. Then, the VCs will find you.
Hope that helps!
Try knowing you need half a million dollars just to get the prototype up and running. heh.
Thanks again for the reply.
99% of the time, they'll think your idea is completely stupid to begin with.
And even if they like it, they have better things to do than try to convince another CEO to adopt your idea and run with it.
Let's face it: you are pretty much the only one today who believes that your idea has any merit.
That being said, the day your idea becomes successful, everyone will start copying it. By then of course, it's all public since you will have launched.
Although a counter to this article: most entrepreneurs or teams with ideas are coming to you because they have an idea and an execution plan. If they have gotten as far as actually giving you their pitch, chances are they have a great idea and it is probably a lucrative deal. I think turning them down just because the leadership team may not be the strongest is not the greatest of ideas. They are not only coming to you for money, but for guidance and leadership assistance. Good VC firms bring together startups with visionaries and proven leaders with good business acumen.
What better than a team of eager individuals who have taken the initiative and would do anything to make their business successful, who have come to you with the right idea and who you can guide to success?
Unfortunately the field of venture capital has become TOO much about "when can I see my return" and is no longer about the other side of the house involving advisory services and strategic assistance to young companies.
However, I can also imagine people seeing this as a personal attack (YOU SUCK!) and in that way start a fight or get into arguments. So I guess, being an entrepreneur you should learn to take criticism, and being a VC, you need to learn how to give feedback without insulting or causing raised voices.
Put yourself in the other person's shoes.
If you have valuable feedback because of your position, experience and knowledge, and you can easily help another person with your honest feedback, why not do it?
Remember, what comes around goes around and do unto others as you would like done to you.
This doesn't need a blog post, its what you should have learned in Kindergarten and your parents!
I have a great idea and have ended my search for a tech guy to help me build it and am now working on my biz plan. Hook me up with a “people person,” a good engineer or two and a little “been there, done that” guidance and we’ll be in the black in two months! Mike Maples…………….you will be hearing from me shortly! :-)
1. Give them 10 - 15 minutes of your time to explain what is missing from the team and what they can do to improve it. Of course don't make them feel like if they have a better team you'll take a look at them unless you do like the product.
2. Selection based on the team as a key metric is common sense but how do you evaluate a new teams ability to deliver. I ask as we've all seen the "all-star" teams get the bucks and flame out just as fast or faster than a small upstart team. Here's a hypothetical... If a team comes to you and has a killer 80% ready application but are missing the all important sales/marketing experience (which is what I've seen the most), is this a likely turn down because of that missing piece or would you potentially help that team acquire what they need? (Hypothetical as I understand every deal & team is potentially handled differently).
P.S. Really like this continuing series, there's a lot of gotchas & what the heck does that mean when you talk terms, etc. and things like this column at least give one a grounding. :)
If you can reshape the team, you will know immediately. If not, you were honest and hopefully the person learns. Since you are funding 2-3 a year, invest in educating the teams and making them better. I found out today that a VC passed 3 years ago on my company because of a team member issue. He should have said something then as I was in need of assistance when it came to teams. I appreciated his candor now that I am assembling a new team for a new venture.
I understand that not everyone is like that, but I think entrepreneurs would understand -- and perhaps even be grateful, in time -- if you don't just say "it's the team" but give an explanation as to *why* and *what they can do to improve*. It takes more time, but ultimately it's the right thing to do.
I've tried various approaches to providing feedback to entrepreneurs, but in general there's no great way to do it I know.
I would want to know honestly if it was me or the team which was the reason for the rejection. My response would be to ask for contacts in the industry the VC has worked with which would be a better fit to bring the product to market and work a deal from there. Gaining this experience and perspective could only enhance my future prospects.
If you often wondered if it was the right approach, don't you think you, and the rest of the VC community, could have figured this out some time ago, without the help of the blog commenters here? This particular characteristic of VCs (little feedback, often vague, and rarely useful) has irked me, as a serial entrepreneur, for as long as I've been talking to VCs. So why are VCs still so bad at honest, helpful feedback - and will these blog comments change anything?
This is a very important question. I have been through countless meetings with VCs and I suspect many times the VCs gave me a lame excuse instead of saying to my face that they had doubts about my capacity.
Here's how you should handle it: "interesting idea, but I think it would take some ex-VP from Facebook to really make it happen". You are giving me clear feedback that I am the problem, but also give me a way to work on it. If I did come back with stellar co-founders, you'd be interested, right?
I have something else to add to that from my own experience: Most startups (certainly the ones I've been involved with over the years) rarely stick (and succeed) with their original plan. That's where the quality of the team comes in.
btw, I'm entrepreneur and have a prototype. Apparently it's not enough. Investors are skeptical and reluctant to invest. They basically want me to start making money before they'll invest, at which point I wouldn't even need their money anymore. Well at least when I do reach that point, I'll be able to get a better valuation.
Shortly followed by an offer to buy out the idea. (cash only eg NOT success based shares/options etc).
If as a vc you have the balls to back your vision then you should have no issue offering them a decent cash amount that will convince the founders to hand over their startup so your own team can move it forward.
..... or is the issue really "with the team"?
Cheers,
Dean Collins
www.Cognation.net