Getting Venture Capital

The probability of an entrepreneur getting venture capital is about the same as getting struck by lightning on a sunny day.

There is a reason for that.  The main reason is that most people who need money need it because they don’t know how to make money.  They have heard that “it takes money to make money” so they think - well gee, if I just had a big wad of money then I would be making money.

I recently had several people email me about getting some venture capital for their new business.  Most of them started out like this:

• I have a website that is losing a lot of money (or not making anything) I can’t afford to renew the domain name which is going to expire tomorrow.  If you could give me $100,000 dollars then I could use that money to make my site very profitable and then could pay you back sometime in the future.

I have some money to invest and thought I might find someone who had a decent investment opportunity.  But this was about as close as I got.

I know several dozen millionaires and they all started with nothing.  They got an idea that worked and they kept working it until they made millions with it.  That’s how it works for the most part.  

I also know several people who got some money and then blew it very quickly because they used it on something that was not profitable.  The key here is you have to have something that is profitable.  If your losing money doing something then doing more of it isn’t going to help you any.  Why it’s that obvious to people?

Like the guy who says he was going to sell his widgets for $2.99 and they only cost $3.25 to produce, when asked how he was going to make up the .26 cents he was losing on each one he said – volume, lots of volume.

I myself have started a couple of business with too much money and I learned some very expensive lessons that I could have learned for a lot less if I would have just started with less money.

Most people don’t understand if you can’t make money right now then the chances of you throwing a huge wad of cash at something is not going to make it profitable and you will end up making some very expensive lessons.

For example you could buy a 3 minute TV commercial at the next super bowl.  Plunk down a few million and see what kind of response you would get.  Or you could go to your local cable station and run a commercial for next to nothing and find out if it sells anything or not.  If it doesn’t then you just saved yourself a few million dollars and you can start to make improvements and come up with a better commercial.