Conflicting goals between VCs and entrepreneurs | Hacker News Reader

Conflicting goals between VCs and entrepreneurs

3 pointsamichail3 comments

It seems to me that VCs and entrepreneurs have conflicting goals. VCs are looking to hit a home run in one out of ten attempts. Entrepreneurs are looking to maximize their probability of financial independence -- which is a different goal altogether involving less risk and a lower payoff.

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Yep. Joel Spolsky summarized the risk/reward imbalance in an article: http://www.joelonsoftware.com/articles/VC.html

This one is a bit more personal and rather bitter: "An Engineer's View of Venture Capitalists". http://www.spectrum.ieee.org/careers/careerstemplate.jsp?Art...

This guy's main experience was in the 1980s, so it doesn't take into account technical people who got rich in the 90s boom and then went into VC. So things may have somewhat improved, in that you might find VCs who really grok your idea. Nevertheless, that doesn't address the mismatch of incentives.

Take a look of the following which is my on-line book in progress. One of the chapter is entitled "How to turn your VC into your worst enemy".

http://www.startupforless.com

At the end of the post, there are quite a few links for comments from successful entrepreneurs on their experience with VC's. My own advise is to deal with VC's as what they are, not what you think they are.

Do not romanticize, but also do not demonize.

I've been thinking a lot about the 10x rule recently. There was a post on YCnews a few weeks ago suggesting that the real success rate was much closr to 50%.

http://news.ycombinator.com/item?id=74562

At a panel of Boston-area VCs I attended, each of them said they had no idea where the mythical 10x number came from and that their success rate was closer to 50-90%. I seem to remember YC suggesting the sucess rate was much higher than 10%.

Granted a lot of these 'successes' are companies that are barely managing to stay in business...but they haven't gone bust either. Maybe a better way to look at the situation is that the VCs want to keep as many companies above water as possible in hopes that some smaller percentage will be a huge hit.

Bottom line, I don't think the goals of VCs and entrepeneurs are really as divergent as the 10x factor suggests.

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