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Advice is free ~ capital is expensive. . .

October 21, 2006

Yesterday a friend of ours brought a young entrepreneur by the office to pitch his idea. We listened for a bit, but soon began offering our ‘advice’. We assumed ‘advice’ was what they were looking for since we have been very public in our decision to stop funding outside deals. I suggested that the entrepreneur lose the Powerpoint and replace it with a simple prop. I also suggested some minor languaging changes - e.g. drop statements like “no one else can do this”. Finally, we recommended that he talk to a couple of local entrepeneurs with experience in the space.

His idea is very cool ~ not sure if it will work, but if it does I suspect he will do very well. When he explained how little money he needed to build his technology I quipped that we might as well fund/build it. The conversation became more serious and then I explained the advantages and disadvantages of working with us. Advantage? No more fund raising, we just execute and move forward now. Disadvantage? We take control. We become ‘partners’ owning atleast 51% of the deal. Nightmare!

What would I do? Easy, raise venture capital. I explained that if I were in his shoes I would pack my bags and move to the Bay Area, get involved in the tech community, find a partner with experience building a startup and raise money from the best venture capital firm I could find. Dallas might be a better location for talent (telecom hardware), but with the turmoil in the local VC market (Sevin Rosen shuttering their latest fund) it might be easier to fund a deal in the Valley (oh and it is easier to build a Googley Workforce there). Too bad because this deal would be right up their alley ~ Jackie Kimzey might be the perfect guy to lead the startup on an interim basis.

Written by Alexander Muse · Filed Under Blog 

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No Responses to “Advice is free ~ capital is expensive. . .”

  1. Scott Yates Says:
    October 31st, 2006 at 11:44 am

    Look, I don’t know what this guy’s idea is, but unless it’s some biotechnology thing he should think about self funding, using credit cards if absolutely needed.

    He may say, “But nobody out there has told me that’s a good idea.” That’s before CreditCardVC.com.

    Look, it’s his dream, he shouldn’t be selling off half his dream. Live on the cards for a few months until he can get enough of a demo built to attract some real paying customers, then use that money to cover the minimums until he can get to a lot of customers, and then he’s done it.

    It may be so capital-intensive that this isn’t possible, but I’ve done it once, and am now doing it a second time. Tell him to go look at CreditCardVC.com for 10ccs of courage.

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