Venture capitalists have been getting a bad rap in the press lately, either for lackluster 10-year returns, not supporting enough innovation, or even contributing to the financial meltdown.
However, Paul Kedrosky, an investor, writer, and entrepreneur well known for his blog, Infectious Greed, and his columns for TheStreet/RealMoney, has a pointed defense of the industry in a recent article in TechCrunch.com.
“Creating a successful startup is among the hardest things you can do in a capitalist economy,” Kedrosky says. “The idea that anyone at all would build a business around funding startups is the remarkable thing. No revenues, no sure market ahead, no collateral, no liquidity, and doe-eyed founders who were in high school when Enron blew up. It all adds up to more ways to break down than an old Winnebago.”
To be successful in your venture capital career, you must successfully navigate a “sea of multi-dimensional uncertainty” Kedrosky says, ranging from whether the product or technology will actually work, to whether you have the right staff, right financing, right marketing and finally, whether or not the start-up company can actually sell the product for more than it costs to produce. At a big company, you can fail at every one of these decisions and still keep your job. In the venture capital world, one mistake and “you’re wandering a maze of dark and twisty passages — most of which are paved with trapdoors to hell.”
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