One of the biggest mistakes entrepreneurs make is not understanding the relationship they have with their investors. At times, they confuse VCs with their friends.
Sentiment: NEGATIVE
Understand that VCs are simply a sophisticated form of financial investors who, in turn, need to satisfy their own investors.
So many folks in the venture capital business are sheep that just want to follow the herd. They are momentum investors purchasing highly illiquid investments. That is a recipe for disaster.
Entrepreneurs always begin the journey believing that they have the next big idea. They dream of the fame and fortune that awaits them if only they had the funding to pursue it. But the reality is that as the product is built and shared with customers, flaws in their concept are discovered that - if not overcome - will kill the business.
Venture capitalists buy minority positions in young companies they think will grow quickly; buy-out investors buy most or all of companies they think can be turned around by fixing a few basic things.
We worked personally with a lot of great VCs. They just work incredibly hard at supporting entrepreneurs and their companies.
I've been a customer of the top venture capital firms, so I know exactly what they do and don't do.
It is intellectually dishonest to lump venture investors with hedge fund and buy-out investors.
VC firms are... responsible for the full life cycle of a company: they find it, help it grow, open up a Rolodex, and sell it.
But successful investors tend to be not too self-destructive. They tend to be patient, they tend not to follow the crowd, and they tend not to be too guilty about winning.
I don't think a lot of people have been entrepreneurial about venture capital.
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