Nope. Not about Ricky Martin. This picture is used to attract more attention. I know, I know. Probably not very effective, but hey, can’t blame me for trying right?
Anyway, my rant today is about another Martin. Martin is a startup founder who is raising his Series A funding. He approached this particular venture capital firm (let’s name the firm MMYB, which stands for “My Money, Your Boss”). To cut the story short, the only feedback that Martin got is “We do not take business model risks”. So Martin went on his way and ended up with funding from another prestigious VC firm and exited with millions of return.
So what is my rant about? I do not agree with how some VCs think that they can actually leave out business model risks when managing portfolio risks or assessing a new deal. Essentially, when a VC looks at a deal you are looking at the possibility of scaling the business and approaching the problem the right way. However, this expansion process often require the need to pivot (pardon me for the overused term). As such, a VC can’t statically assess a venture’s business model risks.
The moment you think that you are not going to take business model risks, you are going to miss out on opportunities where capable founders would be able to adapt and reconstruct the business structure. At the end of the day, the best bets are usually on the entrepreneurs. Not the idea itself.
Something that I always believe – all ideas can work, business model can be structured to fit into the right market segment, but not every VC can come across good founders who would do what it takes to give you the multiples.
That’s all for today. Til next time.