360° Coverage : Is Jackpot Entrepreneurship Right For You?

2 Updates

Is Jackpot Entrepreneurship Right For You?

Mar 5 2014, 1:25pm CST | by

Billions are being made in Silicon Valley by entrepreneurs and VCs. And, like a lottery, much of this fortune seems to be instantly created in the flash of an IPO or a strategic sale. Is Silicon...

Filed under: news

 
 
 

28 weeks ago

Is Jackpot Entrepreneurship Right For You?

Mar 5 2014, 1:25pm CST | by

Billions are being made in Silicon Valley by entrepreneurs and VCs. And, like a lottery, much of this fortune seems to be instantly created in the flash of an IPO or a strategic sale. Is Silicon Valley becoming a new-venture Las Vegas offering the lure of jackpots to entrepreneurs?

Las Vegas has many losers and few winners. So does venture capital. In venture capital, about one percent of investments are home runs and 19 percent are successes where VCs do well. Since VCs usually get their rewards first, entrepreneurs may not do as well in some of these ventures. 80 percent of VC-funded ventures fail in varying degrees. The few billion-dollar entrepreneurs, such as the developers of Facebook (Mark Zuckerberg) and Twitter (Jack Dorsey) are eminently news worthy, and the press cannot stop writing about them – just as Las Vegas and the state lotteries love to promote the few winners of jackpots. In both cases, you don’t hear about the millions who lost.

The odds also seem similar. With casinos the rule is “heads I win, tails you lose.” It is not that different with venture capitalists. They invest other peoples’ money for a handsome fee. If the fund does well, the VCs get an additional cut of the upside gain. If the fund fails, VCs still collect their fee, but the investors in the funds lose.

So are VCs like the casino owners, and are business publications doing entrepreneurs a disservice when they promote VC? Many business-school students no longer ask, “How do I build a business?” What I am hearing is “How do I raise money?” I have to remind them that raising money is not the same as making money.

Given the very few winners in VC as in Las Vegas and in state lotteries, why is there a mad rush to seek VC? When people in their 20s read about Mark Zuckerberg starting Facebook in his dorm and now living the good life in his mansion in Silicon Valley, it is difficult not to be seduced by the lure of instant riches and jackpot entrepreneurship.

Entrepreneurs and students can benefit by knowing the following:

  • The flipping mentality works for only a few. I do not mean flipping hamburgers or houses. We have also been flipping businesses – especially with our focus on venture capital. Open any business magazine and the coverage is mainly of how entrepreneur A, such as the developer of Instagram, built a major business in an “instant” and reached millions of users with venture capital. Or how entrepreneur B, such as the developers of WhatsApp  sold their business for billions even with minimal sales. The goal is not to build a business – it is to flip a business. This is good for VCs and entrepreneurs in areas where VC has succeeded. But VC has not succeeded outside Silicon Valley.
  • The business press needs to balance its coverage. Major business publications often rely on press releases from industry associations, and promote the concept that VCs create jobs and wealth, even when VCs do not do much of either outside Silicon Valley.
  • Business schools need to balance capital intensity and capital efficiency: Business schools often teach the entrepreneurship process as one where students write a business plan, pitch their plan to investors, and seek financing that results in the entrepreneurs losing control to investors. This does not emphasize the building of the business and of the entrepreneur, and the role of entrepreneurial leadership and capital-efficient venturing. Business schools focus on the financing and the riches, and assume that financing success is venture success.

MY TAKE: Some winners in the jackpot entrepreneurship sweepstakes have succeeded beyond the dreams of most. But they are not the rule for 99.9975% of entrepreneurs, and they are not the rule outside Silicon Valley. VC has very few successes, especially when compared with the number of ventures started and financed, and nearly all of them are in Silicon Valley. For entrepreneurs outside Silicon Valley, the reality is different. They really have to build a business to succeed.

Source: Forbes Business

 
Update
2

3 weeks ago

Khazanah throws MAS RM6b lifeline

Aug 29 2014 5:01pm CDT | Source: Business Times Singapore

August 30, 2014 1:15 AMKHAZANAH Nasional will inject RM6 billion (SS$2.4 billion) over three years to resuscitate loss-making Malaysia Airlines (MAS) under a recovery plan that includes even an Act of Parliament. Other key moves are migrating its operations, assets and liabilities to a new company (NewCo) and slashing the workforce of 20,000 by 30 per cen ...
Source: Business Times Singapore   Full article at: Business Times Singapore
 

 
Update
1

3 weeks ago

MAS posts loss of RM307m for Q2

Aug 28 2014 5:00pm CDT | Source: Business Times Singapore

August 29, 2014 1:13 AMMALAYSIA Airlines (MAS) registered a loss of RM307 million (S$122 million) for the second quarter to end-June, but warned of worse to come in the second half when the "full financial impact of the double tragedies of MH370 and MH17" ...
Source: Business Times Singapore   Full article at: Business Times Singapore
 

 

Don't miss ...

 

<a href="/latest_stories/all/all/30" rel="author">Forbes</a>
Forbes is among the most trusted resources for the world's business and investment leaders, providing them the uncompromising commentary, concise analysis, relevant tools and real-time reporting they need to succeed at work, profit from investing and have fun with the rewards of winning.

 

blog comments powered by Disqus

Latest stories

Israel approves rebuilding plan for communities near Gaza
Jerusalem, Sep 21 (IANS) The Israeli cabinet Sunday approved a $360 million development initiative for the communities in the country's south, near the Gaza border, who were hit hard in the recent bloody conflict between Israel and the Hamas.
 
 
High-level Indian ministerial visits to London next month
London, Sep 21 (IANS/RAY) India's Finance and Defence Minister Arun Jaitley is scheduled to visit London Oct 13-14 for an interface with financial institutions to persuade them to invest in India.
 
 
Expressway to link Vietnam and China opens
Hanoi, Sep 21 (IANS) Vietnam's longest expressway connecting Noi Bai in capital Hanoi and the north-western Lao Cai province, bordering China, with a total length of 245 km, officially opened to traffic Sunday.
 
 
G20 deal on sharing bank data to help India battle black money
Cairns (Australia) Sep 21 (IANS) In a major step that will aid India track and recover black money stashed abroad, G20 finance ministers Sunday agreed on allowing automatic sharing of all bank information with tax authorities at the end of each year, starting 2017.
 
 
 

Latest from the Network

Jennifer Connelly shed 25 for husband's 'Shelter'
Los Angeles, Sep 22 (IANS) Actress Jennifer Connelly lost 25 pounds to play a homeless woman in her husband Paul Bettany's directorial debut "Shelter". The "Noah" star not only researched to look convincing as Hannah...
Read more on Celebrity Balla
 
China stripped of world record after shooter's disqualification
Incheon, Sep 22 (IANS) The Chinese women's shooting team Monday was stripped of the world record and the gold medal in the 10-meter air rifle event after the disqualification of one of its shooters here in the 17th...
Read more on Sport Balla
 
Thousands join climate change march in New York
New York, Sep 22 (IANS/EFE) New York City Sunday was the scene of a huge and colourful demonstration against climate change with more than 300,000 people turning out as part of an international initiative to raise...
Read more on Politics Balla
 
Yemeni government, Houthi rebels sign truce deal
Sana'a, Sep 22 (IANS) The Yemeni government and Houthi rebels signed a ceasefire deal late Sunday after days of deadly clashes in the capital Sanaa, an official said. The two sides agreed to cease fire in Sanaa...
Read more on Politics Balla
 
US bombs IS positions in Iraq's Sinjar region
Baghdad, Sep 22 (IANS/EFE) US combat aircraft Sunday bombarded positions of the Islamic State (IS) Sunni extremist group in the Sinjar region of Iraq's Nineveh province, Kurdish sources said. A Kurdish leader of the...
Read more on Politics Balla
 
'Golden Boy' director slams Sharon Stone
Los Angeles, Sep 22 (IANS) Italian director Pupi Avati, who was happy to team up with Sharon Stone in his low-budget movie "Golden Boy", says the actress was a demanding diva on the set and gave him a hard time. Avati...
Read more on Celebrity Balla
 
UN chief welcomes unity government deal in Afghanistan
United Nations, Sep 22 (IANS) UN Secretary-General Ban Ki-moon Sunday welcomed the conclusion of the presidential polls in Afghanistan as well as an agreement on formation of a national unity government in the country...
Read more on Politics Balla
 
Miley flaunts chicken and waffles print bikini
Los Angeles, Sep 22 (IANS) It seems Miley Cyrus' latest style is inspired by food. The singer, who took a break from her Bangerz Tour, was spotted lounging in a chicken and waffles print bikini. The 21-year-old, who...
Read more on Celebrity Balla
 
Israel steps up cyber defence with new body
Jerusalem, Sep 22 (IANS) Israeli Prime Minister Benjamin Netanyahu Sunday announced the establishment of a new organisation that would spearhead the country's cyber defence operations. The decision was made pursuant...
Read more on Politics Balla
 
Wife of British hostage asks IS to free him
London, Sep 22 (IANS/EFE) The wife of a British taxi driver kidnapped by the Islamic State (IS) Sunni extremist group last December Sunday asked the jihadis to show compassion and set him free. Barbara, the wife of...
Read more on Politics Balla