By Dileep Rao
The common assumption in business schools and incubators seems to be that the key ingredients for venture growth are first-mover technologies and venture capital (VC). This belief has resulted in a focus on innovations, shark tanks, angel capital, and VC, and a belief that experts can pick winners from pitches before the innovation has reached the “Aha” stage, i.e., before evidence of potential.
But is this consistent with VC reality and unicorn reality?
VC Reality: The Limits of VC
The VC reality is that only ~20/100,000 ventures benefit from VC, and they get VC after Aha, and succeed mainly in Silicon Valley:
- VCs finance after Aha, which means that entrepreneurs need to get to Aha
- VCs finance ~100/100,000 ventures, which means that ~99,900/100,000 entrepreneurs need to know how to grow without VC
- VCs fail on ~80/100 of the ventures they fund, which means that getting VC means failure 4 times more than success, and that ~99,980/100,000 ventures should learn how to grow without VC
- Few VCs succeed. 20 VCs, mainly in Silicon Valley, are said to earn 95% of VC profits (https://techcrunch.com/2012/09/30/why-angel-investors-dont-make-money-and-advice-for-people-who-are-going-to-become-angels-anyway/). This means that it is not enough to get VC – entrepreneurs need to get it from the Top 20 VC funds, and then avoid failure.
Unicorn-Reality: How Entrepreneurs Really Built Unicorns?
Among the 122 unicorn-entrepreneurs UE) I financed, interviewed, or analyzed, more than 9 out of 10 avoided or delayed VC. This group includes unicorn-entrepreneurs from Sam Walton (Walmart), Bill Gates (Microsoft), Michael Dell (Dell), and Michael Bloomberg (Bloomberg) to current-day UEs such as Brian Chesky (Airbnb) and Niraj Shah (Wayfair). Here is what UEs did:
By using finance-smart business skills and strategies, unicorn-entrepreneurs reduced dilution, stayed as CEO, and controlled their ventures and the wealth they created.
- They used technical skills to start their ventures in emerging industries
- They acquired finance-smart business skills to takeoff without VC. Only about 1% of unicorn-entrepreneurs got VC based on the technology:
- 5% got VC after launching their venture and proving their unicorn strategy
- 18% got VC after proving unicorn-leadership skills and stayed as CEO
- 76% used finance-smart skills and strategies to grow without VC.
Unicorn-Entrepreneurship: How Finance-Smart Entrepreneurs Really Built Unicorns
To grow an idea into a unicorn, Unicorn-Entrepreneurs use a multitude of Unicorn Business Leadership Skills and Strategies.
| Unicorn Business Leadership Skills | Unicorn Business Strategies |
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MY TAKE: The key to your venture success is you – not your innovation or “first-mover” technology. Unicorn-technologies helped 1% of billion-dollar entrepreneurs. Unicorn-Strategy Skills helped 5%. Unicorn Business and Leadership Skills helped 94%.
About the Author
Dileep Rao trains entrepreneurs to start, finance and build unicorns. He was a VC and venture financier (400+ venture; 9 Unicorn-Entrepreneurs-UEs); and turnaround manager (5 turnarounds; 4 succeeded). He has interviewed/researched 113 UEs to learn unicorn-secrets. He offers webinars on “Introduction to Unicorn-Entrepreneurship.” You can contact him via LinkedIn: https://www.linkedin.com/in/dileep-rao/.
