If the idea is good – there is enough funding available

Wherever I go the lack of “funding (willing to take a risk)” = “Venture Capital” always seems to be a big issue. Why?

What’s wrong with starting a business, making money and taking it from there? I suppose there is nothing wrong with that, since >99,95% of all businesses are started this way and >99,95% continue that way. Why is the issue of funding always on top of the agenda, when it is only relevant for less than 0,05%% of all businesses?

2.000.000 companies are started in the US each year. Less than 1.000 of these are venture funded. Venture funding is supporting less than 0,05% of all new businesses.

I think it is because of the X-Factor mentality, the celebrity and “Hit” culture nursed by the media and the expectations of government intervention in the Nordic countries (where I primarily operate).

The X-Factor mentality

We love people leaping out of nowhere, creating new business models in no time and scaring the hell out of some old businesses on the journey. Facebook, Google, Apple, Twitter etc.  By all means, these people certainly deserve credit and admiration. But let’s face it. The odds for creating a new Facebook, Google, Apple, Twitter etc. from nothing are slim.  Extremely slim.

If your ambition is to make it from scratch to the moon in 36 months, you probably need funding. And funding is available. You just have to go where it is and convince the investors that your business idea and your team are more likely to make a blockbuster than the other folks in the line. It is as easy as that.  If you are whining about lack of available funding in your neighborhood or that you get rejected all the time, take a look in the mirror. You may find the answer there. Forget about funding. Build a simple business, get some happy customers, make some profit and take it from there.

The celebrity and “Hit” culture

The press and news media are nursing the celebrity and “Hit” culture. They do so because people love to read and watch stories about other people. And people love to think “I wish that was me” or “thank God that’s not me”. Anything in between (which is the lives of most of us) is uninteresting – for the media.

I know many ordinary people and some of these ordinary people are very interesting.  They tell jokes and are helpful, caring, witty and intelligent. I love spending time with these people. I also know some celebrities and some of them are self-centered, boring and consumed with being a celebrity. They are painful company in all social contexts. If your motive for wanting to make it from scratch to the moon in 36 months is the glamour and recognition; reconsider. You are not going to make it and you will be disappointed if you get there.

If you want to be successful in building a business you must focus on getting customers, making them happy and keeping them happy.  There are only very few businesses, where a celebrity status will support your business. Forget about being the darling of the press and the public – become a darling of your customers. If being a darling of your customers elevates you to celebrity status, deal with it there and then.

Policy makers

Policy makers (and government officials) are not business people. Most policy makers have never had a regular job (a job where you are measured on your performance). They are so far away from the world of starting, building and maintaining a business as you can ever be. Policy makers only know two management controls: People and money. Enforcing a policy means either more or less people and more or less money. The big issue with policy programs is that they are operating with money belonging to no one. (It is all tax money. As soon as the money leave your pockets they have no caring master anymore.)

Let’s imagine that we convince a policy maker that we need a policy program to support entrepreneurship.  What can the policy maker do?  She can allocate money to hire people and put them in an office to administer money of which some will be given to entrepreneurs. Isn’t that good? No, this is very bad. The people hired don’t have any practical experience with entrepreneurship. People with innovative ideas don’t take jobs as government employees. And these people will be giving out other people’s money. Not healthy.

But can’t  the money be given to consultants who can help the entrepreneurs with their issues?

Why on earth should we give tax money to entrepreneurs so they can hire consultants?  Consultants are lawyers, auditors, headhunters, HR consultants, management consultants and business developers. If an entrepreneur has a need for those services and cannot pay with cash, he must pay with equity or make a deferred payment arrangement or turn to his friends and family.  Finding solutions to the millions of challenges is what makes an entrepreneur.  It is the healthy selection process which makes the able survive and the unable salarymen.  If government interference could change that the Soviet Union and North Korea would have been the most powerful nation on the globe. Well, they are not.

The concept of turning to the policy makers for support when entrepreneurship is suffering, may be an integrated reflex in the Nordic mentality.  “I have a challenge – the government must help me”. This attitude is killing entrepreneurship.  If your ambition is to build your own business, the most important ingredient is yourself, your ambition, your persistence, your energy and your skills (of all sorts).  If you believe you can only make it, if you get government support: Drop it. Get a job as a salary earner. If the government is luring you with subsidizes, ignore them. Don’t waste your time chasing tax money, filling forms and talking to people who get their salary independent of your success.

There is enough funding available

If you want funding; if you want other people’s money invested in your business, go find it.  It is there and it is your job to take your business plan to the money. Not the other way around. Don’t expect the venture people to be a bunch of pleasant guys (they are nice guys, but it is their own money, so they are a little more sceptical than the government sponsored innovation centers).

If you cannot find the money, blame it on yourself.  Improve your business plan, your idea, your presentation, your network. Try again.  But if you continue chasing funding instead of chasing customers, you may have gotten something wrong.

One last note: When you need the money desperately, it is very difficult and very expensive to get. When you don’t need the money, it is very easy and inexpensive to get and it may even knock on your door from time to time.

Using the numbers from the US shows that 0,05% of new business are venture funded.  So don’t claim that it is impossible.  It’s not easy, it should never be easy and it will never be easy. It’s like Olympic Gold. Achievable, but you must work hard to get it.