Takeoff without VC: Why 94% of Billion-Dollar Entrepreneurs Did It
Can you grow and takeoff without venture capital (VC)? That is the question every entrepreneur should ask. You spend the same amount of time to build a small business as you do for a growth venture. Might as well go for growth. And 94% of billion-dollar entrepreneurs took off without VC and kept control of the venture and the wealth created. Might as well takeoff without VC.
The real question that entrepreneurs should ask should be how to grow without VC because:
· 99.9% of entrepreneurs do not attract VC. If they want to grow, they need to know how 94% of billion-dollar entrepreneurs took off without VC.
· Getting VC is not a panacea. 80% fail with it.
· Taking off without VC has another key benefit – you can say in control of your venture and of the wealth created. This compares with 30% – 75% of VC-funded ventures where the Founder-CEOs are replaced.
· If entrepreneurs get VC too early, the VCs take control, find a new CEO, and dilute the entrepreneur. Among 22 billion-dollar entrepreneurs, those who delayed VC kept 2x the proportion of wealth created. Those who avoided VC kept 7x the proportion of wealth created.
But can you learn how to takeoff without VC? If you rely on the Entrepreneurial Education Ecosystem (EEE) that includes business schools, incubators, and assorted consultants and mentors, you will be taught the VC-Model, which is capital-intensive and helps about 20 out of 100,000 ventures. Its concepts include:
· First-mover products, which assumes that being first is key. But first-movers only dominate 1 out of 10 times.
· Minimum Viable Products, which may help you start your venture but may not be enough to succeed.
· The Business Model, which does not evaluate the capital efficiency of the venture.
The 18% of 85 billion-dollar entrepreneurs who delayed VC and the 76% who avoided it used the Unicorn-Entrepreneur-Model. The UE-Model uses skills and finance-smart business strategies of billion-dollar entrepreneurs to take off without VC. You too can learn these skills and strategies and see how far your venture will grow, under your control, and keep more of the wealth you create.
Here are 6 unique aspects about the U-E Model.
#1. Unicorn-entrepreneurship is based on how unicorn-entrepreneurs actually built their ventures, not on the assumption made by the entrepreneurial education ecosystem that entrepreneurs need the capital-intensive VC-model to build their growth venture.
#2. Unicorn-entrepreneurship is based on the strategies and skills that were actually used by unicorn-entrepreneurs to find the right product-segment-industry-sales-driver edge for high growth with less capital. Michael Dell focused on selling customized PCs to customers who were willing to buy direct from him. This strategy allowed him to bypass the retail channels, sell direct to consumers, get higher margins, and reduce his inventory needs. Joe Martin learned how to use the right sales drivers to sell cosmetics to consumers and built a unicorn.
#3. Unicorn-entrepreneurship shows how to develop and prove a competitive strategy. As Joan Magretta noted, “a business model is a description of how your business runs, but a competitive strategy explains how you will do better than your rivals.” Entrepreneurs need a competitive strategy to beat direct and indirect competitors, and grow. After developing your unicorn strategy, you can present it on one sheet of paper to investors.
#4. Unicorn-entrepreneurs used the finance-smart U-E Model and skills to takeoff without VC. VC is very limited and rationed to very few people, most of whom are from elite institutions. Skills for the U-E model are not limited.
#6. Unicorn-entrepreneurship is based on balancing intellectual smarts and street smarts. Successful entrepreneurs do not need to be intellectual elites from Harvard and Stanford. Sam Walton (Walmart) went to the University of Missouri. Dick Schulze (Best Buy) did not go to college. Michael Dell (Dell) dropped out of the University of Texas. Joe Martin (Boxycharm.com) graduated from Florida International University. These entrepreneurs combined smarts, skills, and strategies to build unicorns and control them.
MY TAKE: Entrepreneurial education would do better to re-examine its assumptions and ask itself whether it has really “researched” why it is focused on the VC-Model that serves 0.02% of entrepreneurs and not on the UE-Model that can help 100% of entrepreneurs.