Entrepreneur Stupidity Awards | 12 September 2012
September 12, 2012 Leave a comment
The Dumb Wall
It’s Hunting Season! If you’re trying to raise money from professional firms such as VC’s and merchant banks, the period between Labor Day and Thanksgiving is your “best shot” – everyone’s back from vacation, re-charged and ready to find new opportunities. Take advantage … and, Good Luck!
Today’s Post to The Wall: I’ve made many comments relative to entrepreneurs that want to start a company, raise money and be successful. However, I find too many of these afflicted with “Brown’s Secret Disease”: “The greater percentage of all entrepreneurs that fail to find financing is because they are totally uninformed and unprepared.”
Unless you believe in Peter Pan and the Tooth Fairy all money seekers must first understand that joining the war for capital is a long, arduous battle. If Henry V had been this ill-prepared, the chronicles of England would now be in French and historians would universally agree that at Agincourt the English army would have been better armed with slingshots and empty Guinness tankards than longbows. A couple of examples:
We Don’t Need No Stinkin’ BP’s
Call #1: A new entrepreneur calls me about helping him raise money. I ask the standard: “Do you have an Executive Summary and Business Plan?”
He says: “No. A friend of mine attended a summer class at MIT and one of the instructors said: ‘Nobody writes business plans anymore since nobody uses them or ever reads them.’”
“How much money do you need?” was my next query.
“I’m not sure.” he said. “I don’t understand anything about accounting, but I’d like about $3 million.”
My retort: “I tell you what – when you find someone that will write you a check for $3 million without you having the vaguest idea what you’ll do with it, give me a call. I’ll then introduce you to a woman who says that she and her husband can change seawater into gold. They also need some funding. Maybe you can work out a “twofer”. Otherwise, I can’t help you, but I’d strongly suggest you find and recruit that MIT instructor.”
He complained that I was being unfair and abrupt.
My Mother Thinks I’m Really Swell!
Call #2: An inventor calls. He has just filed a patent on a revolutionary heat-exchanger that will “change the world and solve the energy crisis”. He is the sole person in this venture. He didn’t have an ES or BP either.
I then asked him what role he planned to fulfill.
He said: “I just want to sit in the CEO’s office and recruit many, many talented people who’ll engineer all the wonderful products that can be made from this technology - then; manufacture, market, sell and support these. Of course, I won’t get directly involved myself.”
My reply: “How about picking just one, easy product and making a prototype … selling some and proving that the technology will work?”
“I don’t need to do this because my ‘paper design’ is perfect.”
Me Next: “You’re the sole entrepreneur. Nobody invests in one person for the simple reason that if they die, the venture dies with them. In my view, you first need to assemble a team and prove it works.”
“No. I just want you to get my funding - at least $3.5 million. Also, your approach would mean that I’d have to get directly involved.”
My response: “Sorry. I’m not interested.”
He hung up.
A couple of hours later, I receive an email saying I’d never be successful because I was so negative to new ideas.
A Brief Summary: I do not know why some individual entrepreneurs are prone to act in such irrational fashions or to ignore more traditional, proven approaches to funding. I do know at least one finds me every month or so – all prime candidates for posting to the Dumb Wall.
One possible explanation: I have read that some people have a new “generational problem” called “entitlement”. They believe that the world “owes them” and that they will be endowed with wealth and fame regardless of their lack of learning or effort on their part. They disregard any “conventional behavior/wisdom”. Further, they pay no mind to how ill-informed or irrational they behave.
Why is this true? I don’t know. It might be a good subject for more studies or term papers in psychology.
Today’s Tip: Raising money is very hard work. First, do some homework and you’ll avoid being posted to the Dumb Wall.
Avoid the Dumb Wall!
1. If you’re trying to raise money or are having difficulties with your venture, contact us. We can help and the initial sessions are free! (admin@amerwld.com or 843-237-9802 EST).
2. If you have questions, comments, suggestions (or, even a “story” for the Dumb Wall), send them along. Contact me, Dick Brown, at American World, admin@amerwld.com). You’ll get an answer.
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Notes: 1. This blog is posted by American World (http://amerwld.com/) twice every month – with occasional extra editions. 2. The stories posted on the Dumb Wall are true. We do leave out the real names of the people and companies. You can find other recent tales by clicking on those words in the grey heading, above.
