Hallelujah - investment sense for startups

When I read this post by Will Schroter, I almost wanted to print it out and hand it out to Open Coffee attendees.


Here are 3 things investors are not looking to write a check for:

Ideas - Investors aren't going to write a check to you just because you have an idea. Millions of people have ideas and most of them are bad. What makes a good idea is not it's novelty, it's the ability to actually run with it and make it successful in the marketplace.

Founder's Salary - Investors won't pay for you to get a full-time market-rich salary while testing out a new idea. You're not going to keep your $200k salary by having an investor foot the bill. Think $50k, best case, and a regular withdrawal from your home equity line of credit.

Back Debt - So you've racked up $100,000 in personal debt while you were building the business. How about getting that money back when the big investment comes? Forget about it. Investors don't want to invest in your debt. Kiss that money g'bye and hope the money you raised turns into a jackpot to pay it back.

The general rule of thumb is that investors want to invest in the growth of a business, not the expense of an idea.

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posted by John Wilson @ 10:18 AM Permanent Link newsvine reddit


At 12:01 AM, Blogger William said...

All makes perfect sense but must be subject to some exceptions. Innovators can incur much personal debt in the process of meeting real and imaginary VC hurdles.
The smart VC who buys in will realise the futility of having a bankrupt founder. Solvent founders minimise risk. Restricting funding to wealthy innovators maximises risk. Necessity is the mother of all invention but small cash injections also do wonders!

Great blog.


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