Taking Off Without VC: Why 94% of Billionaire Entrepreneurs Did It
Can you grow and get off the ground without venture capital (VC)? That is the question every entrepreneur should ask himself. You spend the same amount of time building a small business as you do a growth company. Might as well go for growth. And 94% of billion dollar entrepreneurs started without venture capital and retained control of the venture and the wealth created. Might as well take off without VC.
The real question entrepreneurs should be asking 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 started without venture capital.
Getting VC is not a panacea. 80% fail with it.
· Taking off without VC has another important advantage – you can say that you have control over your business and the wealth created. This compares to 30% – 75% of venture capital backed companies where founder CEOs are replaced.
· If entrepreneurs get VC too early, the VCs take control, find a new CEO and dilute the entrepreneur. Of the $22 billion entrepreneurs, those who deferred VC kept 2x the share of the wealth created. Those who avoided VC kept 7x the share of the wealth created.
But can you learn to take off without VC? Relying on the Entrepreneurial Education Ecosystem (EEE) that includes business schools, incubators, and various consultants and mentors, you will learn the VC model, which is capital intensive and helps approximately 20 out of 100,000 enterprises. The concepts include:
· First-mover products, which believe that being the first is important. But first-movers only dominate 1 in 10 times.
· Minimum Viable Products, which can help you start your business, but may not be enough to succeed.
· The business model, which does not evaluate the capital efficiency of the company.
The 18% of $85 billion entrepreneurs who postponed VC and the 76% who avoided it used the Unicorn Entrepreneur Model. The UE model leverages the skills and financially savvy business strategies of billion-dollar entrepreneurs to get off the ground without venture capital. You too can learn these skills and strategies and see how far your business will grow, under your control, and keep more of the wealth you create.
Here are 6 unique aspects of the UE model.
#1. Unicorn entrepreneurship is based on how unicorn entrepreneurs actually built their businesses, not the entrepreneurial education ecosystem’s assumption that entrepreneurs need the capital-intensive VC model to build their growth business.
#2. Unicorn entrepreneurship is based on the strategies and skills 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 custom PCs to customers willing to buy directly from him. This strategy enabled him to bypass retail channels, sell directly to consumers, achieve higher margins and reduce his inventory needs. Joe Martin learned how to use the right salespeople 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 competitive strategy explains how you will outperform your rivals.” Entrepreneurs need a competitive strategy to beat direct and indirect competitors and grow. Once you’ve developed your unicorn strategy, you can present it to investors on a single piece of paper.
#4. Unicorn entrepreneurs used the financially savvy UE model and skillset to get off the ground without VC. VC is very limited and rationed to very few people, most of whom come from elite institutions. Skills for the UE model are not limited.
#6. Unicorn entrepreneurship is based on balancing intellectual smarts and street smarts. Successful entrepreneurs don’t have to be intellectual elites from Harvard and Stanford. Sam Walton (Walmart) attended 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 cleverness, skills and strategies to build and control unicorns.
MY TAKE: Entrepreneurial Education would do better to reexamine its assumptions and question whether it has really “examined” why it is focused on the VC model that serves 0.02% of entrepreneurs and not the UE model that can help 100% entrepreneurs.
