VC Lessons

VC Lessons

We’ve closed the door on 2017 and clutching those New Year’s resolutions hatched under the “alfuence of incahol” we strive boldly into 2018.

Being a boring old fart I’ve nothing new for the year but rather sticking to old principles. One of those is to steer clear of bad ideas and stupid people.

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So, with that in mind here’s one of my favourite replies to one of my recent posts. If you’re looking to raise capital for an endeavour, take notes and thank me later.

Canyon Distressed Opportunity Fund likes the backdrop for credit

CanyonThe Canyon Distressed Opportunity Fund III held its final closing on Jan. 1 with total commitments of $1.46 billion, calling half of its capital commitments so far. Canyon has about $26 billion in assets under management now. Q4 2020 hedge fund letters, conferences and more Positive backdrop for credit funds In their fourth-quarter letter to Read More

Way to go champ! As sharp as a blunt stick.

Here’s the bullet point version for you:

  • Get your target to like you. Tick! Man, I’m in love. I mean, who doesn’t like being called a moron?
  • Ask to raise money for something that can be done for free online. Tick! Clearly, there’s something so amazing about this product it can’t possibly be launched for close to free via any of the current methods. I’m intrigued already. In fact, I’m as good as sold. Unleash the genius already.
  • Respond to an email that has NOTHING to do with your proposal. It shows you’re the man. You’re focussed, driven, and don’t give an isht about anything but your gig. Killer!

This had me reminiscing on some of my first ventures where I was as broke as Western Governments (though without the debt) and wanted to get something going.

One thing I learned was that you really don’t need capital to start your own business, certainly not self publishing.

With only your stubby little fingers and Google you’ll find there are literally hundreds of avenues to self publish while greedily keeping the vast majority of the profits with only a smidgen going to Amazon.

And if you really are surviving on a can a day of Purina cat chow, then go get a job packing shelves, mowing lawns, or pumping gas.

But Lordy Lordy, why would you ever borrow money to self publish? And because it makes as much sense to borrow money for this sort of business as it does buying Tesla, no sane investor is likely to lend you money.


So, here are some lessons learnt after being involved in financial markets for longer than I’d really like to admit, including running a VC firm:

  1. The first answer to making money as an investors is to not… well, lose it. Ok, ok. If you want to be picky that doesn’t actually make you money but if you lose it, then you can’t use it to make more so it’s pretty much foundational. If you haven’t got the NOT LOSING part down pat, then it really doesn’t matter what you do to make money because those old habits will just drag you back down to your starting point, wherever that may be. Think I’m joking? About 70% of people winning the lottery are broke within 3 to 4 years and about the same percentage of entrepreneurs raising capital go tits up in about the same timeframe. Coincidence?
  2. Be wary of entrepreneurs whose first answer to the problem of not having what they want (a big profitable business) is to raise money. It’s the same problem we find with Joe Sixpack who wants that new SUV but hasn’t got the cash for it and so finances the thing. More often than not Joe Sixpack is in love with the idea of a flashy SUV and not the utility of the thing, and as such there’s no productivity there. Good solid businesses provide something useful and for that as an entrepreneur you can start small, build a prototype, and go from there. Could be a widget or a service — doesn’t matter. There are two really really cheap forms of financing. One is raising money in a mania (like ICOs now) and the other is self financing through cashflows. First step then is to provide something useful. My friend Derek Sivers made this awesome rundown on exactly this.

What else?

There are dozens of perfectly valid reasons for entrepreneurs to raise capital.

Prototype finished, proven, company profitable? Perfect for growth capital.

Or you have a proven track record and are raising capital for businesses with large asset bases and infrastructure requirements.

Or like one I’m looking at right now: financing a gold mine in Brazil with two successful mining pros. Large gold mines after all are quite unlike the business of self publishing books.

And though I don’t need to tell you, I will: we’re at the bottom of the cycle where we buy assets for cents on the dollar.

So here’s to 2018. I for one am really looking forward to it. You know why?

– Chris

“It is better to be roughly right than precisely wrong.” ― John Maynard Keynes

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