The need to raise venture capital is a myth. Many successful business are starting using a bootstrap model. Entrepreneurship does not equal financing.
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- One of the things that you will see very poorly reported in the media is that over 99% of businesses of entrepreneurs, who go out to seek venture financing get rejected. What that means is that if you want to be a successful entrepreneur, you kind of believe that you have to raise venture capital, which is a huge myth.
Venture capital is not success. Entrepreneurship does not equal financing. Entrepreneurship equals customers, revenues, and profits. Financing is optional, exit is optional. As you parse what I'm saying here, try to keep in mind the criteria based on which VC's invest in companies. VC's are looking for companies that are ultra fast growth, ultra large total available market size opportunity.
We're talking about billion dollar, multi-billion dollar business opportunities and we're talking about companies that go from zero to one hundred million in five years. Very few companies have those correct characteristics and the less than 1% of companies that do get financed by VC's and angels, who feed into the venture capital ecosystem, are looking for companies that fit that characteristic. So obviously, most companies get rejected because most companies don't fit that profile. But if you look at the world out there, if you look at the business problems, if you look at all the issues that consumers are dealing with, there are, for me, for a person like me, who lives and breathes entrepreneurship, there are entrepreneurship opportunities everywhere and these opportunities can be five million dollar opportunities, could be 10 million dollar opportunities, could be 20 million dollar opportunities, could be 50 million dollar opportunities, none of those fit the venture capital model, but you can build a wonderful business with customers, revenues, and profits, and have a wonderful life.
That's why bootstrapping is so important, is if you learn to bootstrap, you can build a business and have a wonderful life and at some point in your cycle of building this business, it may make sense to bring in outside investors, and you can do that too. You can bootstrap first, raise money later.