The Kauffman Foundation study also illustrated that almost 86 percent of companies that succeeded in the long term did not take VC money. Why? Because a companyâs interests may not always align with the interests of its backers.
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4.3. Marrying for Money
âOnce you understand that, you can think through whether you have a business that investors will want to invest in. Itâs not a given that your company is right for venture capital. Most big VCs are surprisingly risk averseâthey wonât invest in startups that canât prove theyâre already on a clear growth trajectory. VCs have been trained by the internet age to expect numbers before they invest: growth rates, sign-up rates, click-through rates, unsubscribe rates, run rates, all the rates. And VCs have bosses to report toâtheir LPs, the people and organizations who give them money. They need to show that theyâre making wise, highly profitable investments with the right management teams.
This means we donât just obsess upon our financial results; we look at our long-term impact on the communities we serve and we adapt policies and programs to be a positive force. And, given thereâs much less cofoundersâ drama than most other companies, our employees can focus on how this start-up, which became one of the worldâs most valuable hospitality companies nearly overnight, can live its mission helping our customers âbelong anywhere.
If youâre a company of one, your mind-set is to build your business around your life, not the other way around. For me, being a company of one means not having to bother with infinite growth, since that was never the purpose of my working. Instead, I just focus on maximizing work in a way that works for me, which can sometimes mean doing less.
Sol Orwell, a fellow Canadian, has refused venture capital for his very profitable business, Examine.com, because he doesnât see an upside in relinquishing control to venture capitalists. He doesnât need cashâhis company makes seven figures per year. He isnât looking for a quick out or trying to sellâhe enjoys his work a great deal. As a majority owner, he doesnât have to answer to anyone except his paying customers.
Itâs easy to take comfort in the fact that other people agree with us. As legendary investor Warren Buffett pointed out, though, âThe fact that other people agree or disagree with you makes you neither right nor wrong. You will be right if your facts and reasoning are correct.â
The people executing established practices say they want new ideas, but they donât want the bad ones. And because they so want to avoid the bad ones, they never deviate enough to find good ones.