Tuesday, April 26, 2011

Wrap 4/26

I think I can see the way a VC thinks.  He wants to get in and out with a big profit, and he is willing to take a risk, but the proposition has to have a decent shot at success.  Common sense, eh?

Why is it hard for some ideas that look good, but can't get funding?  Most likely, they don't have a product yet, or their market isn't exactly clear.  Let's look at Microsoft.  In the early eighties, IBM came out with the PC, and chose Microsoft as one of the two software companies that would make an operating system for it.  If a VC looked at Microsoft, they would see a sure market for the name brand of IBM, an existing product ( an existing operating system) ready to ship, and a company with a track record in the business (Microsoft).  They would have a good chance of an exit strategy in 3 to 7 years, and a reasonable chance to make a profit.  As things turned out, it was a lot better than that.

If anyone wants to make it big, they had better approximate the Microsoft model.  But that's common sense, isn't it?  But common sense isn't so common.

Your odds at success are diminished if you don't have a product, a reputation, nor a name brand.  All of these combined would be a combination that is as close to a sure thing as you can get in this world.

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