Blaming Angels and VCs for Choosing is Like Blaming Up for Down

I was happily reading Sramana Mitra’s The Other 99% of Entrepreneurs on Read/Write Web, agreeing with every detail, when I ran into a snag. It’s in italics in this quote from Sramana’s post.


Over 99% of entrepreneurs who seek funding get rejected. Yet, the entire world is focused on the 1% that is “fundable.”
The media, when pitched a startup story, is interested in who funded the venture. They seldom ask how much revenue the company has or if it is profitable. Incubators take pride in how exclusive they are and how many “deals” they “reject.” Angels and VCs, of course, discard most of their “deal flow.”And entrepreneurs? They seem to have confused the definition of entrepreneurship altogether. Entrepreneurship, they mistakenly believe, equals financing!

This is wrong.

I agree with her: It is wrong — except for that one extra detail. On the core of it, well, I posted something similar more than three years ago, in a respectful hats off to bootstrapping, on this same subject:

For years now, I’ve complained every so often about how we (in blogs, business plan contests, academia and entrepreneurship in general) tend to idealize the venture capital-financed startup, the SBA loan and the more formalized and carefully planned financial strategy. This is especially true in venture competitions.

This is the real world. Bootstrapping is often the only way to start, build and grow your business.

But don’t blame the investors. That’s like blaming up for down. Angel investors spent about $18 billion last year to fund more than 50,000 startups; of course they have to pick and choose. That’s the nature of investing in startups. And venture capitalists are investing other people’s money. They’re being paid to generate a return on investment. Their job is picking the best deals they can find. It’s for the rest of us to understand and respect bootstrapping.

Sramana Mitra is way too smart for that. I like her work and read her often, and included her in posts on this blog. I think she just got on a roll and added one detail too many. Because everything else in that post makes a lot of sense. And she’s one of the best writers/bloggers/thinkers you can find on startups and investment in general. I love her reengineering capitalism idea. So consider this a small correction for a really good post. On an important subject.


  • Doug Johnson says:

    I don’t want to sound critical of either your points or Sramana’s, which are both good, but, need a “tad” of qualification: I think it should be pointed out that self-funding and bootstrapping are best suited to business start-ups in which you personally posses the technical and/or creative skills to produce the product upon which your concept is based. Service businesses (i.e. SaaS) lend themselves nicely to rolling up one’s sleeves and working hard at building a business through grit and determination. If your business concept relies on teams of highly skilled scientists, artists, and programmers (read highly PAID), and you are only the idea-man / team builder, you are going to also need to be able to attract someone else’s capital, or you will be out of luck.

  • Sramana Mitra says:

    Hi Tim,

    I have no problem with investors rejecting entrepreneurs, actually. Most entrepreneurs go to investors prematurely, or with businesses that are inherently unfundable.

    However, I do have a tremendous problem with the media not covering entrepreneurs who are
    self-funded and bootstrapping.

    Over my six plus years of journalism, I have consistently covered companies that are in this category, and have unearthed hundreds of great stories, given them visibility … this includes once unknown stories like Sridhar Vembu (Zoho) and Girish Navani (eClinicalworks) that are now relatively large companies.

    If our colleagues in the media followed my example, it would make the overall entrepreneurship eco-system flow much, much better.

    Currently, the media is totally misleading entrepreneurs to believe that they ALL need to raise money, and financing = success.

    Regards, Sramana

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