Worth Zero

Ron Conway accelerates investments to real-time | VentureBeat.

So, not that Ron Conway will really care about my opinion, but I am going to give it anyway because I think that this view is at the root of the widespread delusion. In brief, the reason why so many of these companies fail is because the ability to invent coupled with the resistance to working for someone else is called entrepreneurship. No, it’s not.

You need an investment portfolio as described because so many of these companies will fail. Conway says “we are funding innovation”  … maybe. But most of it is not COMMERCIAL.  This is a product focus / push approach. It’s the approach of most inventors. It results in funding lunatics. You might get a few gems, but they’ll be very expensive to get to. You are going to have masses of failures doing this. Hang on … there are masses of failures! This is outlined in a previous post where it’s pointed out that 50-70% of Angels are losing money. The solution, more money doing the same thing … seriously?

Of course everyone shouldn’t get funded. The big names Twitter / Facebook / etc still are yet to prove they can make money. In the end, if they don’t, they are going to be dead.

The fundamentals apply:

• you must have a product people want
• the customers must be willing to pay for it
• the customers must be willing to pay a price that will support your chosen distribution model
• you must be able to sell enough of them to make it worth doing

All the companies that don’t have ALL of the above will eventually run out of people stupid enough to fund the next round … whether you store your photos and share them with your friends there or not.

I have an idea, how about Angel investing as described in the books. You put in some money, you get involved with the company, it’s in an industry you understand so you have contacts, you mentor the young entrepreneur … I think you’ll have a much better chance that the ‘shooting at a pinhole target with a shotgun’ approach.

But what would I know …