It was a 1954 Ford coupe.
Like many men on campus, I had a love affair with my car that might have rivaled those with co-eds. And though a Ford coupe was not prime muscle car material, I spent hours and all my money trying to convert it into a road monster. What I discovered is that while my love for cars is enduring, my love for that car was only temporarily endearing.
Like many youngsters, I failed to fully understand the expense of automobile ownership. Before the coupe entered my world, a bicycle got me around as needed. But owning a bike lacked the masculine panache of owning a car. An automobile offered the ability to take me wherever I wanted to go, whenever I wanted to go there. Distance, rain, stamina and image were all limiting factors to a college man on a bike.
When the chance to buy the coupe came, I didn’t even think about what it would cost in gas, repairs, insurance, oil changes, enhancements and repairing those add-on enhancements that took the poor old coupe beyond its specifications. Despite souping it up, it never ran for beans. Swapping the automatic transmission for a manual was time- and income-draining, and ultimately bad for the vehicle. My bank account soon dwindled to zero.
But I didn’t think about the expense -- only about driving my not-so-hot-rod.
I soon was selling some of my valuables just to keep my car going. I hocked my trusty rifle, some of my fashionable clothing and other things that I cherished just to keep my car on the road. My coupe was making a wreck of me. It hurt, because I was constantly trying to raise money to fix my car.
I finally depleted my cash, and Dad said, “Just park it.” There I was, literally stuck. I could hardly get back on my bike again. It just didn’t seem right for me to pedal after expending so much effort, money and pride on the coupe. I struggled to think of ways to finance the vehicle, because my aspirations for wanting the car exceeded my logic. It seemed like every dime, everything I earned was going into that car. As my bank account bottomed out, so too did the palatability of my driving privilege.
This is pretty much the way Silicon Valley operates.
The difference between what is endearing and what is enduring is much like the difference between a lover and a spouse. Your intents are very different between a dalliance and marriage. An entrepreneur can spend his energy on creating a product, which like all products has only a limited life span, or he can build a company that adapts and grows. Products are endearing like short-term flirtations, but building a business that outlasts you is an enduring endeavor.
Which is why working with venture capitalists (VCs) is like souping up a 1954 Ford Coupe. An entrepreneur’s focus becomes less on designing a company, building a culture and creating an enterprise and more on the next funding round. Because first-round investors are product-focused and want a fast return on their investment, the entrepreneur becomes defocused on building his business and engrossed over finding money to continue operations and grow rapidly, regardless of how endangering both activities are to his company.
Every day he spends looking for the next funding round is a day he has not thought about broader product lines, deeper services or a culture that creates self-sufficient employees. The money hunt keeps entrepreneurs from constructing their businesses and achieving their missions.
Silicon Valley exhibited an ugly pursuit of endearing products during the dot-com explosion. It is somewhat understandable, because nobody knew what commercialization of the Internet would look like, so venture capitalists tossed money at every entrepreneur with roughed-in code and something akin to a business plan. As each company launched big and the revenues failed to materialize, their CEOs spent all their time hunting for more investor cash.
On the money hunt and away from attending to their companies, these new businesses never received the guidance needed to rationally grow and soon enough died when the money ran out -- no revenues, no margins and no taste for additional risk from venture capitalists. It still happens today, though VCs have become a bit more circumspect.
However, VCs remain impatient -- and that impatience perpetuates the money hunt that poisons many promising entrepreneurs. They are like young men focused only on a hot rod and not on those things that last.