Investors don’t like this type of companies…
My credit card company doesn’t like me very much for a reason and that very reason is why investors don’t like a specific type of company…
The investment game is very simple and very few people will tell you the truth of it. It’s not a bad game or evil in any way, but it’s a capitalistic game and sometimes does not go down well in some tummies. The game is this:
- Find someone to give money to.
- Give them (if possible), more than they need.
- Make them spend it.
- Get more returns.
Does this sound familiar? If it does, here’s why: credit card companies have the same game-play and they hate it when you don’t spend money and thereby making them rich in the process.
Exits
Investors make money at exits. And these are just like the ones you see on a freeway. You have to keep driving along until you see an exit and that’s when you can cash in your chips and leave.
If there are no exits, the investor can’t get off and that’s not what s/he wants — an endless road trip.
And that’s the reason why lifestyle business or business that just need enough seed to start making plenty revenues by themselves are not really attractive to investors.
Also for them to make more money before the next exit, you have to drive faster, harder and sometimes even take risks that you might not generally be inclined to take had you been chugging along just by yourself.
Every person goes through their own “hippie” period in their late teens and early twenties. And without fail, in every generation, one would hear slogans something similar to what I heard when I was younger — “Live and let live”, “Be free” and, “Wander and never settle down” (One of my favorites from the 60s was “Make love, not war”)
Well, they all say those things until you actually take their advice and start doing those things. You start acting carefree and people come up to you and say, “when are you going to be responsible?”
Those hippie slogans are people just pretending to be cool and on your side, but are just words with hollow shells.
In the startup world, people will tell you, “customer money is the best money”, “don’t raise money if you don’t need to” or “as long as you make it, it doesn’t matter”. These are mere hollow words that most investors will say on the stage in some speech they give to aspiring and budding entrepreneurs.
Sign a deal with them and the world turns upside down. “When are you going to be responsible (with my money and make me 10x)?”
Bottomline
Investors don’t like companies:
- That don’t need their money
- That may only need to raise once before they start cruising on their own (no exits)
Just like my credit card doesn’t like me because I don’t need or spend their money and help them grow richer!
Additional (interesting) read:
Here is an article by Gary Vaynerchuk — Make Money: Don’t Raise Money…
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