4.0
3.8 
4.2 
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4.0 Analogous Proof of Concept
TheFunded.com Open Letter
Posted by Lionel on 2009-06-09
I was just at the Microsoft campus in Mountain View for "Launch: Silicon Valley 2009" (http://launchsiliconvalley.org/index.htm) and came away with some additional insight as to why there is so little "Venture" in VC. During the 9:00 am session Ken Elefant from OPUS Capital asked a presenter to provide "analogous proof of concept."
In my humble opinion there are two ways to read this 99% of the time, first, can you show me something similar to what you are doing so I can wrap my head around it and then bash you for not having an original solution? Or second, come back to me when you have reduced the risk to nothing and "all" you want is $5m in growth capital. The remaining 1% of the time, the VC may actually understand the question he is asking, appreciate something vaguely analogous, enjoy extreme risk because he wants extreme reward and make an early investment. The first 99% are the "lucky" guys who are still talking about huge exists in 1999 and 2000, the remaining 1% are those that invest quietly and carefully and know how to make money in up and down markets.
As many of you have already mentioned here and on other posts, VC math is broken and the market in general is due for a shakeup. I wholeheartedly agree; let's keep searching for the 1% of smart money and dump the rest.
Lionel;
You have it right when you say that the VC wants you to reduce the risk to nothing but still give him 70% of the company for putting the same cash that you put in. Sweat equity counts for nothing.
But don't blame him. Everyone wants the same deal, if they can get it.
What the VC (and everyone else) is counting on, is that you have no where else to go. Once that is perceived to be the case, by both you and him, then it is time to make a "deal".
All sorts of people go through life on exactly the same basis .... small fish trying to dominate an even smaller pond.