“What’s your capital loss ratio?” This is the one question any entrepreneur worth his or her salt should ask their prospective Venture Capital investors.
Why? Simple, it will tell you everything you need to know. End of story.
The point I want to make is about how often Venture Capital investors simply write off their investments. Which is what matters most for the entrepreneur, since for them it is a binary event — either they will make it, or not.
But Venture Capital investors often get it wrong
Your Venture Capital investors of course will have a completely different opinion. They will talk about finding the next unicorn or global phenomenon. About world domination, etc. The really funny ones will say that they are looking for the “next Facebook”, or something like that. I kid you not.
My advice is simple. Do not listen to them. Confusion has got them by the short and curlies, so to speak. All you have to do is take a look around you:
So many new and emerging (but still tried and tested) techniques, tools and methodologies. All of which have one single and hugely significant aim. That of reducing waste.
It is getting ridiculous then, that the average investor, most likely including your prospective Venture Capital investors, considers a capital loss ratio ~80% as “natural” and “reasonable”. In this way, they push their portfolio companies into [notorious] overspending. Well, they call it “aggressive deployment of capital”. A concept which is fewer words just means maximizing waste.
Modern-day tragedy
Over-confidence? Ignorance? Confusion? Whatever you want to call it, it is surely a true modern-day tragedy of large proportions.
So, don’t fall into the trap of generating [unecessary] waste. Don’t listen to the vanity metrics sirens. Just stick to Ash Maurya’s principle of making sure that you take the right action at the right time. If you do that, then success, both for founders and investors, is inevitable.
The point is to make a wise choice for your co-driver, or your wing man. Choose someone who respects their Venture Capital investors’ money as much as you would like them to respect your company. Choose an investor with low capital loss ratio.
But it’s not all one-way traffic
But wait, there’s more. Because yes, it’s not all one-way traffic. As an entrepreneur you need to know you have a choice. And it’s massively important how you make it. Equally the same applies to LP’s, or limited partnerships.
For the prospective LP, the traditional Venture Capital game is a highly oligopolistic one. What do I mean by that? Simply that few VC’s make huge returns ,and the vast majority hardly returns their invested capital.
This is fine if you invest in the Sequoias of this world but there’s only a few of them. And from our side, we do not aim to be the next one, in the same way that we don’t aim to invest in the “next Google”.
A better model exists
Oh yes it does. It is proven by successful growth equity investors where the capital loss ratio is VERY low. These guys rarely lose money. Of course, they do not generate crazy returns either, but it’s a much safer and “healthier” investment choice.
And this is exactly what we aim to offer with our Starttech² fund, which is launching this year. We will bring the growth equity investment qualities in the early stage space. How? Thanks to our innovative Venture Building Program.
Starttech² and the Starttech Way
If you’re not familiar with it, our differentiated approach comprises of a longer fixed term (between 18-24 months). We offer added value in the form of invaluable marketing and technical support services, on top of the usual packages out there. And we don’t wait until the end of that period for a ‘demo day’. Every day is a demo day for us!
In essence, we’re not about short-term provision and a competition-based selection process. We see ourselves as companions. We’re it together, for the journey as much as the end result. We amplify the collective element. So that we don’t just care about profit (more about a low capital loss ratio actually), we care about growth and success.
Get involved, invest in Starttech²
Our team at Starttech Ventures firmly believes that during the next 15 to 20 years the Eastern Mediterranean market shall witness thousands of success stories of lean enterprise software solutions. All of which will thrive in the marketplace helping small and medium-sized enterprises to compete for success in the international marketplace.
We know it’s going to be thousands, and we aim to be the co-pilots in the journey of at least 50 of them. So, if you are Venture Capital investors who are keen on joining the ride, drop us a line and let us know!
