Why We Need Fewer VCs And 97% More Reverse-VCs

17 Sep 2021
6 min read

Post Highlight

Accept that there are too many VCs in the world waiting for Aha, but not enough Reverse-VCs producing Aha! When the mainstream media refers to a venture capital investment as a startup, it's time to accept that the investment is a sham. #ThinkWithNiche


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The term "startup" has been expanded to include any endeavor in which a venture capitalist invests. Venture capitalists and the media refer to a venture as a "startup," even though some of these "startups" generate sales above $250 million. It is time to take seriously the fact that institutional VC funds (identified as institutional VC funds) ignore 99.9 percent of initiatives, that they spend 100/100,000 and fail on 80 - they "only" help 20/100,000.

According to former VC Andy Radcliff, investing in venture capital is controlled by a small number of businesses that account for 95 per cent of the industry's returns. As a consequence, there is a lot of money invested, and only a few people succeed. The majority of successful venture capitalists are based in Silicon Valley since that is where the unicorn-entrepreneurs are, but entrepreneurs outside of Silicon Valley must create their unicorns without VC, which 90% of them do.

Furthermore, VCs would not be successful in the absence of unicorn entrepreneurs.

  • Venture capital businesses aren't known for hitting home homers. They are referred to as unicorn entrepreneurs. Entrepreneurs start the fire, and then venture capitalists rush in to aid. Their sole contribution to the fire's flames is more fuel. Approximately 94% of billion-dollar firms were established without the assistance of venture investors. Furthermore, 76% have never used venture money. While eBay was already generating millions, venture capitalists started knocking on its door. The same may be said of Microsoft and Amazon.com.

  • VCs were unable to recognize home runs before Aha. Unicorn entrepreneurs must-have skills and access to Reverse-VC. Before Aha, Steve Jobs and Google were turned down by around 10 venture funders. "Pitch competitions," "business plans," and "shark tanks" are all nonsense.

Where is the scarcity in this? It's difficult to claim that there isn't a shortage of venture capitalists when only around 3% of them earn a lot of money and the other 97 per cent are mediocre or failing because they can't find home runs to fund. Is there a dearth of unicorn entrepreneurs who can bridge the gap between concept and Aha to generate more unicorns? Everyone does not see things from the same angle. Because entrepreneurs' aspirations constantly outnumber VCs' skepticism, the demand for venture financing will always outnumber the supply. From the perspective of entrepreneurs who do not acquire it, venture capital is always scarce. They seek VC money for their untested ambitions. A Scottish proverb goes, "If wishes were horses, beggars would ride."

According to the 97 per cent mediocrity rate, there are too few home-run transactions for existing VCs. To compensate for the failure rate of 80%, one or two home runs are required for every fund. Without home runs, it's possible that an early-stage VC fund would be mediocre or fail. However, only a small fraction of venture investors (3%) invest in home runs. Netflix, one of Foundation VC's most successful investments, earned more revenue than all of the firm's other 199 ventures combined... COMPOSED!

In order for VC to hit more home runs, a larger number of entrepreneurs are required. Do we need fewer and more Reverse Venture Capital firms instead of a huge number of venture capitalists? Before VC money is invested, entrepreneurs must prove their company's viability. Reverse-VC constructs enterprises from the bottom up, using entrepreneurs' skills as a weapon.

It is founded on hot and proven prospects, finance, and a capable CEO who follows the founder. As a result, the Reverse-VC model is largely reliant on entrepreneurial skills, financial acumen, and alternative funding until Aha! The venture capital model aided 6% of billion-dollar entrepreneurs. Without VC, the Reverse-Venture Capital model-assisted 94 percent of billion-dollar companies. The VC paradigm benefits 20/100,000 businesses, but the Reverse-VC approach may help all entrepreneurs.

There are three primary objectives: to bridge the gap between a concept and an Aha!

The 99.9% VC-avoidance rate, 80% loss rate, and 100% VC-hype that they fund "startups" must be taken more seriously, and entrepreneurs, business schools, and incubators must understand the skills-based Unicorn-Entrepreneur method and Reverse VC – not the Opportunity-plus-Venture Capital-based method.

TWN In-Focus