Earl R. Smith II has some words of warning for those seeking funding.
Most money chases fail because the founders do not have an investment quality company. [...] others fail because they either mismanaged the process or misunderstood how a successful money hunt should be managed. Yet others fail because they are simply not credible as entrepreneurs. This article is about that last group. Experienced angel investors and venture capitalist are always on the lookout for them and seldom take them seriously.
Might – shudder – you fall into one of Earl Smith’s eight entrepreneur antipatterns, his “Crazy Eights”? Let’s see..
- “Man Have Got a Great Idea”, i.e. I’ve got a great idea but I need loads of other people to do all of it, and loads of money to fund it. Put another way, “I may be useless but my idea’s fantastic, ok?”
- “Down the Rabbit Hole“, i.e. delusionary visionaries who very rarely talk with anything so down-to-earth as customers. People who fervently believe in their own hype but rarely (if ever) reality-check it.
- “It Is Just Me and the Mice“, i.e. Lone Rangers who simply cannot draw any high-calibre people into their team. It almost always takes several people to build a profitable company, so where’s your team?
- “I Had Some Spare Time“, i.e. part-time entrepreneur, not really interested in the competition, lax on details, not really committed in any significant way.
- “A Gambler with Your Money“, i.e. a proper entrepreneur is neither an accountant (too dry) nor a gambler (it’s not about hoping for long shots), but someone who does his/her pragmatic best to minimize risk every day.
- “Implementation is for the Proletariat“, i.e. monetization (and indeed often implementation) is beneath me.
- “Do Not Know, Do Not Care“, i.e. when the investor knows more about the startup’s competition than the entrepreneur does. Has done no due diligence on his/her own company!
- “I am Learning All the Time“. With rather less than a nod to Eric Ries’ Lean Startup movement, Earl Smith says that (sure) learning is nice, but that startups are actually about converting what you’ve learned into money.
Are you one of Earl’s Crazy Eights? Though #6′s seem fairly thin on the ground round my way, I must admit that I’ve met a fair few entrepreneurs who plainly fall into one or (often) more of all the other categories.
More to the point, do I fall into any one of them? Certainly, it would be easy to place every entrepreneur pitching a pre-revenue startup (as I am with Nanodome) into crazy pigeonhole #8: but it feels like a bit of an investor cop-out, a bit of a lame, catch-all alibi for not investing. As I recall, roughly 50% of all startups that receive angel investment are pre-revenue, so this is perhaps the only really unfair category of Smith’s crazy eight.
Of course, I would say that, seeing as it’s the only one I think I fall into. But you’ll have to make up your own mind!