Money is the god of this world. Especially in the world of finance and venture funding. As a result, venture capital (VC) dynamics have gone quite mad and this is very discouraging.
A fund needs to deliver impressive returns to its limited partners if it hopes to raise subsequent commitments. Therefore, a traditional venture capital firm invests based on a startup’s ability to attract follow-on investors. This is so the VC can exit profitably.
It becomes a pseudo-Ponzi scheme of sorts and that’s where the dynamics go awry! The VC who starts out earlier, gets paid with more certainty. As they exit, others come in. That is why accelerators attract many startups. The initial funding they invest is attractive. But more important is the visibility and networks they provide, leading to valuable introductions to venture capital firms.
Early Days and Teething Problems
Some VCs started with a grand mission to do things differently. But the phenomenal growth of tech companies has contributed to a mad race for multiples. There’s this overwhelming FOMO. VCs review business models to check the company’s capacity to scale quickly and to match the speed of the venture capital’s impending exit.
Investing is rarely about what impact the product can have. So this can make the fundraising process exhausting, dehumanizing and humiliating. Founders are reduced to their ability to turn a profit for the VC. And because fund managers are overwhelmed with requests, they only have time for elevator pitches from forced extroverts. All adding to the belief that the dynamics of venture capital are indeed, quite mad.
Entrepreneurship Makes You Creative
I was a product manager for decades. I understand the frustration of entrepreneurs. They care deeply about what they are building. So when I listen to founders now, I think product first and profit second. I am excited by new models. I am enthralled by the impact business can have on humanity. And that is why venture co-creation suits me more than traditional venture capital.
I like to build things that don’t yet exist. I love human potential and societal impact. This means my primary job as an investor is to not only invest in businesses but to also find those products that delight and transform. This helps me craft business models that are profitable and make everyone happy, including the limited partners of our fund.
My foray into finance began on the retail side. My default mode is helping the middle class to gain financial independence. It’s the only way they can become active citizens and create the SMEs that can power economies. So, venture funding for me is about creating those businesses.
At Volition Cap, we want to create a model that primarily focuses on venture co-creation, with brilliant founders. Interestingly, we’re now developing our own homegrown ventures too. And so, the VC is becoming a start-up. These are exciting times and we invite you to join us.
For more, please read https://www.subomiplumptre.com/growingabusiness
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