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Prateek Dayal

Interesting article. Sometimes your idea has a decent market and you have put together a prototype (or more than it) that proves the viability of the model. However writing a b-plan with numbers for next 5 years is still something a lot of people are not able to do. How open are angel's to such cases?

Regards
Prateek

Anand Rajaraman

Prateek: Actually, I don't believe in forecasting numbers for the next 5 years, or even the next 2 years. It is very hard to forecast accurately in our fast-moving industry.

What I'm looking for is an instinctive sense that the company has a "big" market opportunity a few years down the line, measured in the hundreds of millions of dollars.

Edward Dorrington

Your observations imply the assumption that a startups end goal is acquisition. If, however, your goal in starting a business is simply to grow and run that business, then using bootstrapping as your sole funding source can be a viable way to go.

Anand Rajaraman

Edward: I'm talking here about the conventional forms of liquidity for investors and founders -- either an acquisition or an IPO. If your goal is neither, but the income stream from the company, then bootstrapping is just fine. In fact, it may your only option.

Ragnar

VCs seek "$100 million in revenue" potential? I had no idea they had their sights set *that* high. Part of that equation would be the general buzz, too, right? I mean, there are probably plenty of web-based businesses that (1) aren't run by proven names and (2) aren't especailly technologically advanced; yet their popularity alone gives them some sort of decent valuation.

Found you on Twitter, btw. Glad I clicked to follow you. -RD

jeremy liew

Anand,

Nice post. I think for consumer internet companies like the ones I invest in, since there is often very little technology barrier, there is a shift towards looking for meaningful user adoption as a "barrier", especially for social media companies where there is a network effect. This is separate from the market size question which focuses on revenue potential.

I'd argue also that many backable teams have not previously worked at a successful or fashionable company, or had a prior hit. But they do need to demonstrate an insight into the market that goes beyond that of the average person and blog reader!

Anand Rajaraman

Jeremy: Great point, coming from a real VC. One way to look at this is that for consumer-focused internet companies, meaningful user adoption serves both as proof of a significant market opportunity AND as an entry barrier in lieu of technology. Therefore startups with meaningful consumer adoption pass the VC test.

Anthony Kuhn

A great primer on the world of startup funding and one that I linked to today in my blog post at the Innovators-Network in hopes of sending more readers to Datawocky to read the piece for themselves in its entirety. Thanks for this gem!

cor madera

The Inc. article has mangled your
name to "Rajmaran" = King of fools ?

Andreas Ramos

The truth about VCs: they don't know much about technology, but they must invest their money. So they look for certain-results projects, let the founders get it off the ground, and then throw out the founders and take over to maximize their profits. Quite simply: they steal the idea. Talk with Silicon Valley engineers who've led startups: very few will ever work with VCs again. I've worked in a number of startups; I've seen this over and over.

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