Thursday, 6 May 2010

Is it a Business or a Venture?

Gold Key, weighing one kilogram is used to acc...
Robin Klein from The Accelerator Group once asked me a very simple questions:"Is it a business or a venture?" Even though it might sound silly, the reasoning behind it is really relevant to any founder that wants to raise funds.
A "Venture" in our context is high risk/ high profit value proposition that can scale massively, is unique and has potential to be the next big thing.
A "Business" in our context is a lifestyle type business where founders try to make money from almost anything they can think off, building a product, selling services, do a bit of coding for clients.
Lifestyle business makes a lot of sense. It's lover risk, rewards are almost instant (what you sell is what you eat) and it can show results and reasonable growth.
Unfortunatelly,  venture capitalists don't invest in life style business. If you want to know why, check Fred Wilson's series of posts on economics of VC fund. They are in business of discovering gold, not in the business of making gold harvesting more efficient. For that you need different kind of investors.
Founders should figure out what kind of model they want to pursue and pitch it accordingly. 
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2 comments:

ToeDip said...
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Ivo Spigel said...

Ales, great to see you blogging on the super-relevant European startup scene topic. Will be sure to follow the blog closely and publicize it to my network!