"Ladies and gentlemen! Children of all ages! Welcome to the Venture Capital Circus!"
"I am Genuine Smiles, clown extraordinaire. Pleased to meet you, sir! And, you, sir! Madame, don't let the children wander off! Gather round. A little closer, if you please."
"You have all been invited, by special, exclusive, no substitutions, no cancellations, no floozoolations invitations to see the secrets behind the world-reknown Venture Capital Circus. Stay close. Tell no one what you see. And, of course, no photos, please."
"First stop: the Big Tent!"
Attracting attention is useful for all companies, even self-funded ones.
"Not impressive, you say? The Circus is all about the show, not the rickety wooden equipment, the faded costumes or the elephant poo. Don't underestimate the power of the show. Venture capital isn't the same as self-funding. With self-funding, you are a juggler in the park: you build organically, customer by customer, from the inside out. But, with venture capital, you build from the outside in. You assemble a wobbly and unsustainable show, with elephants, clowns and all the rest, and hope that Big Money comes to save you before you fall."
"What is Big Money, you ask? It might be a million customers, paying $9.95 per month. It might be fifty large companies, paying $2 million a piece. Or a humongous company paying $100 million to buy it all! Or, please lean closer out of earshot of the little ones ... an I.P.O."
Neither speed nor efficiency is important if you don't end up with a sustainable product.
"Risky? Gadzooks, my good man, you hit the nail on the head. The trapeze artists might be drunks, the jugglers might be incompetent, the equipment might be shoddy. Maybe we make a dancing fish act that nobody cares to see. Maybe the horses all croak because we forgot to buy hay. Maybe no customers come and even the Big Tent falls in on our heads!"
"Ha, ha! Yes, it is, madame, without a doubt. It's wasteful and inefficient. But Big Money, if we manage to capture it, can pay for lots of mistakes. We make mistakes, yes, many, but by capturing the Big Money early, if it works, we get lots of advantages, even though we have to drag along and continue to pay for lots of mistakes that might've been avoided."
Founders with venture capital take a different path.
"Ringmaster! Great sir, join us if you will. Ladies and gents, I present the Ringmaster, the Founder of our great Venture Capital Circus."
"Our Ringmaster, like many ringmasters, came from outside the industry. Before he got venture capital, his last job might have been as a journalist, a political lobbyist, a mutual fund manager or a college professor. Still, he educated himself and learned a lot as an amateur and an observer. He was ambitious and smarter than average. Sensing that his efforts would collapse on his own, our Ringmaster sought venture capital."
"A good question from the gentleman in the back. Nobody would give our Ringmaster venture capital to build a company at first. But, to get venture capital, he needed to build a company to prove that he could. A puzzler! A Catch-22! A conundrum! An enigma! A genuine stumper!"
Venture capital choses short-term speed over long-term efficiency.
"Ha, ha! A good guess, dear sir. But, no, he was not independently wealthy. To hire his first clowns, he had to get us to work for no money. How? If we were his friends and we trusted him, he slapped a giant sticker on our backs that said, 'Vice President' or 'Director of Operations'. Then, he gave us a wheelbarrow-full of funny money and sent us off to work. When he ran out of friends, he hired kids, fresh from Clown College, at minimum wage. And, then a few who were washed-up, kaput. Even the venture capitalists put him in touch with a few, who were willing to take a risk or soft in the brain or both. His meager personal savings paid for what it could and the rest worked for free."
"Not a nice thing to say, sir, but fair. Hired for enthusiasm, not for skill. The clowns weren't funny, we made equipment that easily broke, nothing lasted, all of poor quality. Even today, we spend much of our time, patching and hammering, trying to keep everything from falling down around us. We built it fast, with nobody to tell us what to do, so who can blame us?"
Looking for venture capital is a major distraction.
"He was on the road, of course! Our Ringmaster was on the road, at the time, canoodling the investors, spaloodling his presentation and flapuloolding with his lawyers. Months came and went away. The Big Tent began to sway. We all looked to escape some way. But the phone call came one day! Eureka! Hooray! Great Heavens Day! Venture capital was on its way!"
Venture capital companies often have inept management.
"Thank you, sir, an impromptu poem. Anyway ... the investors added their own 'professional managers'. They still called us all 'Vice President' and 'Director' but others came and were called such-and-such, too. Great men, with fine top hats and impressively greying brows, who looked pretty in an office and in pictures on our website. With money, we hired recruiters. The recruiters found more patchers and hammerers, to patch and hammer our Big Tent back together. No problem couldn't be fixed with more patchers and hammerers! More patchers and hammerers! More! More!"
Venture capital relies on immediate success.
"Our circus opened. Would the children come to see us? Would they tell each other about us? Was it an exciting, spectacular, amazing show?"
"If not, some patcherers and hammerers would have to go. We'd have to close the show. Spend money trying to invent a new show. Spend money trying to patch and hammer with fewer patchers and hammerers."
"But, we'd done it! The children came. They called out to one other, walking through the elephant poo but staring up and pointing to the top of the tent. They gave us more money! We built bigger shows. More children came. With even more money! It was the Big Money!"
"Ringmaster, thank you, sir. A great man, our Ringmaster. Busy now but we're quite lucky that he stopped."
"Now, gather round all. A teeny, tiny bit closer. I will now whisper the secrets of the show. Lean close. Closer."
"Pfffffffffffffffffffft! There are no secrets!"
Never say "always" or "never" to venture capital.
"The show is a powerful tactic. A self-funded juggler in the park can entertain a man sitting on a bench. Over a thousand days, he can entertain a thousand men sitting on a thousand benches. But, if they all come on the same day, as a large, fast-moving, enthusiastic crowd, he can't put on a show. Venture Capital can. But, in the same way, if Venture Capital prepares for a thousand men in one day and only one shows up each day, that juggler'll be around when many with venture capital have been swept away."
"Anybody can pursue venture capital at any time. It is easy as pie for a trapeze artist to change costumes to become a clown. If you are self-funded, you can watch the way the wind is blowing, open your umbrella and try to catch venture capital at just the right moment as the crowd heats up."
"The venture capital show is an illusion, powerful but delicate. It is skewed, no, sir, not skewered, skewed towards speedy growth, at the expense of stability. With the show, venture capital can more quickly hire employees at competitive salaries, field larger teams and attract a larger number of early adopters. It can leverage resources many times its own while those without venture capital must rely only on what they already have."
Venture capital companies both grow and die more easily than self-funded ones.
"But it's speed also makes it terrifyingly brittle, easily popped. When the Big Tent goes up, it is built hastily and poorly. Those early joiners become sewn into its structure and the later 'professional managers' are hired only to look good for the show. A ship of fools! Ten men hired to do what one man could do in another circumstance. But, if the crowd loses interest, some fools must be cast off and the remaining left to do the work of many. A shoddy ship with too few patchers and hammerers most often sinks."
"Aye, sir, it might be prevented by the ringmaster. But the ringmaster himself is split betwixt finding the venture capital and creating the circus. It is all too easy to change the show to court an investor and let the crowd pass you by. It is easy to end up thrashing, trying to stay alive by canoodling investors, with no hope or thought to the future."
"Venture capital is like a man shot out of a cannon. If the aim is slightly off, it is a terrible tragedy."
“Advice? Honk! Honk! I'll give you the advice, young 'un, to keep your funding to yourself. To compete with venture capital, keep your aim narrow but your source code flexible. Build quick but sturdy. Hire well. Strategize. Execute. Be ready to strike.”
"But, alas, the end of our tour has come. Now, kids, who wants to join the circus?"
"What? No takers?"
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