Tuesday, May 26, 2015

The problem with government-funded venture capitalism

Image result for tech startup

I was invited to a strategy session the other day by a good friend who has years in the business development and marketing fields.

'David,' he said, 'I'd like you to come and see a presentation from a group that I'm working with. They have a neat technology solution and they're looking for some help in trying to find a way to attract some more investment. I've always enjoyed your perspective on things and I think you could bring some clarity to the conversation.'

I agreed to the meeting and scheduled 120 of my precious minutes to go and see the presentation and give some feedback. I ended up being there over 3 hours.

The presenters have a technology.  Let's call it an online 'gizmo.'  It solves a problem for business and the market is supposedly huge.  The presenters showed me how it worked, showed me how it saves money and then asked for feedback.

'What are your sales?' I had asked.
'Zero. No sales. We believe in a freemium model.  This is what our advisors have told us to do.'
'Does it really work? Could I go online and sign up today and have it fix my problem?'
'Yes. Can you tell us how to position this so that investors will be attracted to giving us more money?'
'Yes,' I said.  'Show the investors that people are willing to pay you. Show them sales and they'll be all over it.'

So let me ask the question to you, kind reader: How is it that a company can run for years giving away its goods for free and have no sales strategy at all?

I mean not just 'no sales' but actually no sales strategy. My friend was helping them with this.  He's been advising them for just a few weeks.

How can these 'entrepreneurs' run around travelling and using all the latest tech gear?

How can these people think that the solution to running out of money is to seek more investment?

Why haven't they been selling their solution for months or years?

They've never had to.  The government just gives them money in hopes that one day they'll create jobs.  It's true.

You know what the punch-line to the joke is?  They hope to sell the company to a bigger IT company somewhere else in the world and cash out.

It's true.

If a market exists for a product, customers will create a demand. An entrepreneur will fill the need and something will be created.  If the government makes money available, someone will invent a solution to a problem that may or may not exist so they can dip their hands into the cookie jar.

I'll stop now.  I'm getting upset.

I showed them several ways to sell their gizmo.  I certainly hope no more of my tax dollars go into it.

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