By Esemplastic|October 22, 2018|Capital Efficient, Money, Startup, Venture Capital|


Have we been mislead on how to approach and attract money? Twenty years ago I learned through failure and 100s of venture experiments that money goes where it’s best treated. A dire ingredient within any angel investor, venture capital or private equity mantra.

Money seeks to be protected, vested and monetized.  So why are most startups today asking for capital to figure out their business solution. There was a time when we solved problems and then ask for funding. Are we solving problems or chasing money? It’s obvious we’ve lost our perspective on the fundamentals of money. Yet its all an illusion that can be wielded to our advantage.

If you are starting a business who’s your beacon of light towards capital and scaling success? What inherit qualities make them the ideal point of reference? Do they effectively contribute their acumen with relevancy to your business model and marketplace?

As Ray Kurzweil states ‘technology grows exponentially’, meaning today we use contemporary technology to build future technology at an accelerated rate. Thus what measurable value can a successful business person or investor from several decades ago have today? These are key questions to ponder but they are not essential to the success of your business nor do they necessarily move money.

An example of time and its technological relevancy to money is Shark Tank. What enables this TV show and its investor host to decide the fate of your business and in some cases the proliferation of innovation and solving problems? Why isn’t their knowledge and success shared with the entrepreneur in order to maximize their potential?  Rather than dramatizing their disregard for what  they consider not successful or a good investment.

In February of this year Amazon purchased Ringer (formally known as DoorBot) for $1 billion dollars. In 2013 DoorBot, an innovative product and proven business model, appeared on Shark Tank to be rejected. After Shark Tank, Richard Branson invested $28M into Ringer. It seems Richard and Jeff have a keen understanding of what moves what.

Is there a standard metric for investment and capital? Many VCs think so and represent it in their investment criterion. Yet how can we diligently align money, investor sentiments and startups into a capital efficient marriage? Here is one approach that begins to unravel the dilemma into a foreseeable horizon. I call it ‘The Personalities of Money’.

There is an old colloquial saying “time is money” and there’s a good reason for this analogy. Time and money are directly proportional to the output value of any system, process or even product. Hence automating throughput or solving an old problem with new technology can equate to a multi-billion dollar business. Time similar to money have personalities. But which personality of money will align with time and innovation in order to forge a success business model?

The personalities of money are comprised by three adjective constructs outlined as follows;

-spendthrift: little understanding of how to value or nurture money
-penny-wise: value money via risk aversion with no initiative to nurture its needs or monetize it
-efficient: values and nurtures the fundamentals of money in order to protect and monetize it

Today most startups personify the spendthrift personality of money. Albeit looking for capital in order to solve problems. Ironically these same startups seek penny-wise investors focused on spend risks rather than presenting a scalable business model. How do we converge the spendthrift and penny-wise altered egos into an efficient role? One that is capital efficient and thereof dynamic to monetization.

Key Ingredients

When we invest there are key questions and ingredients your business model needs to posses in order to first attract investors and show capital efficiency;

1. What problem does your solution impact or solve?
2. How can we measure the performance of that solution?
3. What is the added value the solution proffers in dollars and cents?
4. What is the current stage of the solution’s ability to deliver maximum and target result?
5. What is the investment amount and specific allocation?

If your business model meets and can show tangible figures to points 1 through 4 you most likely don’t need venture capital to get started. If you can solve a real problem for customers and charge money for it, your best source of capital are customers and selling. We see 1000s of business plans per year and when conditions 1-4 are met we try to sway startups from giving up skin exchange for venture capital.

As an investor this may seem odd and counter intuitive BUT we believe in identifying, instilling and burgeoning intrinsic value. This fundamental attribute can pivot and counterbalance how we solve problems and attract economic drivers to ensure long term sustainability. This approach most importantly can empower the startup to harness and maximize their fullest potential by first effectively solving problems while being capital efficient (e.g. the ideal coupling of time, money and innovation).

Like so many when starting a business I implore you to consider designing your business model around sustainable and durable values and not a VC-centric approach. Its feasible to scale a tech enabled business with little capital. And vital to limit the amount of capital you take. The future is not about the personalities of money or how you treat it. Tomorrow’s success is critical to how you effectively solve problems while intrinsically preserving capital.

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