I have had hundreds of startups reach out to me at Red Rocket looking for fund bringing up assistance. Most with starving, passionate entrepreneurs seeking to build a great company in their space. But, it is normally the technology startups that get through the filtration system of what I believe is “fundable” by professional business capitalists, predicated on my interactions with those investors. Which leaves many of the startups in other categories (e.g., CPG, retail, restaurants, real property, manufacturing) struggling to secure startup capital.
Today’s lesson will address why that is the case. Technology startups typically have normal business/execution risks that VC’s are prepared to take, especially after they have flushed out the concept seeing a material proof of the idea already acheived before trading their capital. But, think about other startups. Restaurants and retailers have the excess risk of real property locations (e.g., what happens if the road you can be found on moves under building).
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They also have the additional inventory obsolete risk (e.g., what goes on if you pick the wrong products to sell). So, rather than taking on multiple types of risk (e.g., execution, real estate, inventory), the VC will typically take the other dangers from the table, and concentrate on technology startups where the risks are much reduced.
The cost of building a technology startup has … Read the rest