The Great Tech StartUp Lie…

As a start-up entrepreneur I have been led to believe from the books and magazines and the people working for start-up helper organizations that all you need is a solid business plan comprising of an easy to understand business model, solid management team, etc. But they all leave out one very important thing, YOUR NETWORK.

While there might be many companies and people less capable than you, they have a “network” a network of friends, angels, venture capitalist, potential clients with decision making abilities, that you might not have. None of my books or magazines mention this, then again, they might not “sell” as many books or magazines if they did. So when looking at what might differentiate you from another business that gets some seed capital, look at who they know and at who you know. That just might be the difference.

What I find funny is that I just received an email from TechWeek, stating how “Venture-backed Companies Make Formidable Impact on Economy“. As I started to read the article I noticed they are reporting the same lie. An excerpt reads ..”For every 100 business plans that come to a venture capital firm for funding, usually only 10 or so get a serious look, and only one ends up being funded.” They say they look at management team, concept, marketplace, etc, but what do they really look at? None of the above!

Venture capital firms look at the 10 plans of the people they know, then the ones with the the right combination of business and network they pick for funding. For example: one man company with a great product and small network, will not get funded, but 5 people with an OK product and a large influential network will. This is not rocket science and there is no great magical formula, it’s about who you know 1st, and what you know a distant 2nd.

I don’t so much mind the article, the PDF or the whole venture or angel capital thing, I wish they would just be honest about how things really work, rather than giving people hope with a very small chance of success.