Whose the Bigger Opportunist? Venture Capitalist, Angel Investor, or Entrepreneur
March 24, 2010
I heard a VC admit that “many VCs are being opportunistic these days”. Finally, some blunt honesty! This has been my silent observation over the past year. I’ve heard VCs talk about searching for those opportunities where they could acquire great and promising technology on a restart proposal. Just the other week, I talked with a CEO o a 4-year old startup, who had $9M in investment and had just completed first year of sales at $2.5M, and a venture capitalist were asking to wipe out all the previous investors in order for them to obtain additional funding.
I’ve heard angel groups openly state that they want their investment to go toward non-salary expenses only, expecting founders to work without salary for several years and too wipe away any loans or deferred compensation recorded. Some of the seed funds are asking for a non-diluting 25-30% of the company for less than $50,000 in investment. Technology companies don’t accomplish much for $50,000.
I’ve heard VCs say that everything is free these days for start-ups, even people. So why isn’t their funding and investment free too? It common to hear service providers and consultants tell me that they are working for start-ups on an equity only basis. Given the opportunistic nature of start-up investors, I wonder if they will ever collect on their equity-only fees.
Entrepreneurs have been opportunistic as well. Most of them have half-bake ideas and want investors to fund their great idea so they can be paid a salary. My impression is that a lot of wanna-be entrepreneurs today would drop the investors as soon as the job market recovered and they could get a secure, corporate job. I met an entrepreneur, who had been the CEO of 5 startups. Each time he raised money and he paid himself a handsome salary. After about 4 years, the funding would run out and he would close the startup and get investors for a new one. And just a few weeks, ago, I heard he had raised money for his 6th startup.
Where there is profit, there is progress and opportunists.
Filed under: Funny Stories and Humor
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