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Entrepreneur Dysfunctions in Cartoons: Pipe Dreams

Posted on Monday, Jul 21st 2014

PipeDreams Cartoon

Honestly, this comic strip is based verbatim on my personal experience!

As you know, I anchor the 1M/1M Free Mentoring Roundtables weekly. After close to 225 sessions, I am astounded at the level of unrealistic expectations and pipe dreams that entrepreneurs come to us with. Still.

Just last week, at our 223rd roundtable, we had an entrepreneur called Madhu Kodali from Hyderabad, India pitch Project Recuerdos, a concept for preserving memories gathered from all kinds of digital sources. Madhu expects seed money to get his project started. Unfortunately, investors don’t fund concepts. You can listen to Madhu’s pitch and the ensuing mentoring discussion in this video [25:35-35:30].

There was a time in the history of the technology industry – definitely in Silicon Valley, but to a lesser extent, even elsewhere – when powerpoint presentations that made outrageous and unsubstantiated claims used to be able to get funding. The Dotcom bubble of 1999-2000 was that period. It ended with the Dotcom crash.

Today, the industry still indulges in plenty of outrageous behavior and funds all sorts of speculative ventures. However, in terms of seed funding, they tend to look for a key metric: TRACTION.

Traction means you need evidence that large numbers of users are willing to use your product, and ideally, pay for it. Alternately, you need large numbers of users using your product, an audience that can then be monetized with advertising dollars.

So if you are still dreaming about angel money being available to get you started and help you gain traction, you better rethink your strategy.

One last story: In 2006, Mark Kvamme, an investor who was a General Partner at Sequoia Capital, told me that the firm doesn’t fund any Business-to-Consumer project unless it already has millions of users, and shows exponential growth. He used YouTube as an example.

Today, pretty much all seed investors have adopted this philosophy.

So don’t bother dreaming about a scenario that ain’t gonna happ’n.

Good luck!

This segment is a part in the series : Entrepreneur Dysfunctions in Cartoons

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