Friday, March 12, 2010

Why you Shouldn't Accept VC money earlier than you thought: Story about Venture Capital and an Outdated Decision Maker revised

I met Gary Haran at confoo and stalled on one of his post:
It might be advantageous to accept VC money earlier than you thought.
I have auto-censure one of my post about VC but it need to be republish to ensure entrepreneurs understand the possible deep consequences of such a decision. The post Anatomy of a failed software project initiate my thought of un-censure it because we don't talk enough about bad experiences to not offend people or been seen as too negative but its reality and we should have realistic expectation. With Amazon EC2, google app engine, rackspace hosting and so on, it is becoming way less costly to bring new technologies to the market. Most software company don't need big founding anymore and have just more reason to avoid VCs.
I strongly recommend boostrapping your company with consulting and/or R&D credits, INRS programs etc.

So here is the revised version on the post I have pushed Apr 29, 2009 12:32 AM and removed.

Once my boss, which was one of the founders of the company that I was working for, told be: Avoid as much as you can VC, it should stay your last resort. I haven't realized the deep importance of this after some American sharks VCs took control of our company and enforce their ultra capitalism short term vision. GM is a good example of short term vision but, that's another interesting story.

Venture Capital represents high risk investments and their only gold is to get the highest return on investment in the shortess time period. That's fair, you simply have to know the rules.

Entrepreneurs build and invest, VC rape everything that is possible. At that time, they replaced the top management with their Californian super stars or ... remaining turnips (j'exagère un peu). One of their last super star, when I was there which I will refer to "Le Chasseur", came to take the highest position of the technical side of the business. At that time, I was working on new technology and this old cowboy grandpa came to tell me that we weren't doing real research. According to him, real research was what he was doing 25 years ago with his wired and transistors. I simply told him that our group of 3 (i.e: including manager) weren't pretending doing research but simply doing applied research and definitely not pure research as his thousand of coworkers were doing in the old monopolistic US company he was referring to. This guy had made lot of money in the good years of the Internet and was annoying me with his stories, I should have told him to go and say it to his little sons and daughters and simple retire and let us work. His only salary could have let us build a much better team to continue innovating in technology which was our core business. Without any support from him, even working against us, we still have manage to release a complete new technology (i.e.: prototype + knowledge transfer to prod+ prod support) that is bringing quite lot of income to the company. Charlie, most important point is to bring technology to the market, nothing else matter...I have succeed even if he desperately try to make us fail to justify moving advance stuff to California.

Those clowns (i.e: I know, I am over generalizing) were just sucking all financial resources of our company. Been still a share older, I was relieve to hear that "Le Chasseur" has finally been fired in a reorganization. If you need reorganization to do cleanup in a private company, your level of politic game should be quite high... and politics leads to corruption and mediocrity in such an organization. We could have become a great company but it might remains an average one, I don't think I deserve that after such investments but money leads. According to old colleagues, the latest reorganization was efficient.

I think that the concentration of smart people is higher in CA then in Montreal, but we definitely fall on some bad apples.

Key decisions can't stand in incompetent hands, soon or later the guillotine will come. If you made money and reach your level of incompetency, please let the others take the lead. If you haven't make money, just reorient your carrier. We don't care about your ego, the fact that your are the initial founder etc. what is important is the company success and everyone will benefit from it.

You might have better story and or points of view about VC but what I saw wasn't great:
  • They stop/restrain investment in innovation
  • They drop some incompetents clowns (over generalized to make the point)
  • They suck all money to pays their clowns
  • They made your shares less valuable
  • They drawn massive amount of money on building products that had no real value and on non core technology
  • They create a real wall between decision makers and the workforces
  • They invest a lot in fake partnerships
  • They love yes mans
  • They feel way smarter (especially CA vs Mtl)
American VC are like the FMI for Argentina in the 2001 crisis or Corea in the Asia Financial crisis of Golden Sach for Greece bankruptcy, you are going to be fucked.
I hope that I will never in my live work again for a company that will be taken over by VC. If you need VC, you might already been badly organized to need desesperatly money from them. I would definitely like to hear good stories about VC where they achieve their least.

Yes I had a painful indirect experience with VC and an outdated decision maker but I knew that startups environment aren't easy. I learned better the rules and the game by playing it. I wish they will find a way to make money because success bring success and Montreal deserve more of them, there is so much talent here. I have emphasis on one bad decision maker but the CEO and the CFO were interesting character...but you need one bad apple drop by your VC to fuck your company and they will get most of the benefits.

As mentioned in Samual Bouchard blog, we need way more private founding alternatives but were aren't yet there.

No comments:

Post a Comment