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There are a number of good books on the subject.
While the great ones cost several hundred dollars apiece, we've become extremely
fond of Fundamentals
of Venture Capital by Joseph w. Bartlett. The process of venture investing
is, in reality, a form of for profit research and development. Since business
must continually innovate, venture funding is the key dimension in the ongoing
evolution of markets and technologies. Along with money, investors add expertise
and involvement to help a small idea mature into a big one. Any competent
investor understands that the development of a real business requires a
patterned flow of investment and not a "one shot deal". One of the many untold stories of the "dot
com gold rush" is the way that monied amateurs entered the investment arena
posing as Venture Capitalists making unsubstantiated promises and wreaking havoc
on the small companies they got involved with. Our industry includes a fair
number of operations who received an initial investment, the promise of
additional support and a lot of monkeying around. Many of them died simply
because the investors were so inexperienced that they did not understand that
their actions produced fatal distractions in the objects of their
investments. While blame can and should be spread to the
companies who were brutalized by these witless spenders of Other Peoples' Money
(OPM), the broken promises of the investors are directly responsible for the
aggravating increase in the age of receivables throughout the industry.
Many an executive reputation has been damaged for the trust placed in fancy
talking managers who posed as Venture Capitalists without having the slightest
idea of what they were really doing. The level of irresponsibility was
staggering. For the most part, these idiots were spending the funds of their
large parents while pretending to be investors. Their victims, where they
survived are brutalized but wiser. The market has been ill-served by companies that
grew their businesses based on the promise of additional capital infusions that
failed to materialize. While the company founders usually take the blame, it is
clear from our perspective that irresponsible investors are at the root of the
problem. Usually, however, it is the customers who suffer the most. Unless growth is carefully managed by wise
leaders who have already learned the lessons, it is easy to think that your company
can grow as fast as it can take in orders. Unfortunately, problems associated
with "scale" emerge when overlapping orders cause the time to install
a system to increase. Even things as simple as the improvement of a user
interface create layers of workload for the customer service department. Without
seasoned managers in the queue, it is quite easy for growth to put a company out
of business. Rapid growth always requires capital investments because the
necessary workforce must be hired and trained in advance of the cash that comes
from sales. That money has to come from somewhere. On Monday, we'll look at an emerging success
story. RecruitUSA, ravaged by its inexperienced investors, has managed to turn
its battering at the hands of fools into a foundation for market innovation and
ultra-reliable performance.
- John Sumser
Talent is what matters most.
Authoria Recruiting 2007 is a next-generation recruiting solution that helps you:
Find a smarter way to hire. Download our complimentary white paper
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