Funding Ventures
Enterprise capital (VC) is the threerd rail of enterprise financing. It is very charged and mostly misunderstood. The idea is that there’s a shortage of VC, implying that more VC will end in more home runs, more wealth, and more job creation. Yet, a couple of VCs earn most of VC profits, and only a few entrepreneurs profit from VC.
VC was developed within the U.S. The primary VC fund was in Boston and Silicon Valley has perfected the funding strategy. So VC is just not only an American invention, however it could only have been developed within the U.S. Here is why.
#1. VC is about financing high risk ventures. The U.S. accepts high risk.
The U.S. is the most entrepreneurial country in the world. VC is about opening latest frontiers by financing emerging technologies and emerging industries. VC is high risk because many enter emerging industries, but few succeed and fewer dominate. About 80% of VC-funded ventures are said to fail. Without financing successes and residential runs, VC fails. This is analogous to the American spirit of searching for latest frontiers and the risking of private fortunes and lives.
#2. VC is about growing the dimensions of the pie. So is America.
America is about growth and so is VC. Without growth, the U.S. will lose its dream. Increasing the dimensions of the pie allows more to share within the American dream.
#3. VC promotes emerging industries. So does America.
VCs wish to get in on an emerging trend and grow with the upward trajectory of the wave of the emerging industry. The U.S. has been the leader in emerging industries from Intel and semiconductors in the 1960s to private computers to the Web and AI. This creation and emergence of latest trends and industries has been the muse for VCs and the rationale for his or her high returns. And America created all of them.
#4. VC is about dominating potentially big markets. So is America.
The concept of America has been to create huge markets and dominate them. Similarly, every VC would like to finance an early-stage enterprise that may dominate a potentially huge market. This has been the case with homeruns from Microsoft to Airbnb.
#5. VC accepts failure. So does America.
80% of VC-funded ventures fail. VCs accept failure as a price of doing business. So does America. Failing at a business is just not seen as the tip of business life. Entrepreneurs can, and have, come back. Second chances are high available, and comebacks are heralded.
#6. VC is a pyramid. So is America.
As I actually have noted before, 3% of VCs are said to earn about 95% of VC profits and about 15 ventures are said to account for about 97% of VC profits. Meaning only a few ventures profit from VC and only a few VCs profit from home runs. America is identical. The highest 1% is claimed to own $41.5 trillion in wealth compared with about $2.6 trillion owned by the bottom 50%.
#7. VC destroys dinosaur industries. So does America.
VCs finance unicorns that construct latest giants while destroying the old. America is best at destroying obsolete corporations and industries in contrast to many countries that try to guard their aging industries and obsolete hierarchies.
#8. Most significantly, VC needs Unicorn-Entrepreneurs. America develops, attracts, and rewards Unicorn-Entrepreneurs.
VCs don’t create unicorns. Unicorn-Entrepreneurs do. VCs need Unicorn-Entrepreneurs like Steve Jobs who can take an odd idea, akin to music downloads on an emerging trend, and construct a worldwide juggernaut. VC depends on Unicorn-Entrepreneurs like Jensen Huang (Nvidia) who come to America and construct their unicorns here. America depends on Unicorn-Entrepreneurs to create latest unicorns and maintain America’s competitiveness.
MY TAKE: VC could only have been developed in America. VC is about growth and alter. So is America. VC depends on Unicorn-Entrepreneurs. So is America. For more unicorns in America, we want more Unicorn-Entrepreneurs before we want more VC.
