Venture capitalists avoid innovation whenever possible, Andy Singleton says:
They claim to be in the business of innovation, but they also talk constantly, often in the same paragraph, about how much they want to avoid innovation.In this latest conversation, the VC said “We look for companies with a product and a proven business model.” This should should sound familiar to you. I wish I could run a video montage of the pictures in my head of VC’s saying how much they want to avoid innovation. Surely you would laugh. If you ask VC’s what they look for, they use words like “traction”, “proven business model”, “reference customers”, and “invest in marketing” or “sales and marketing”. This in itself is a big step forward from “We invest in teams that have done it before” (Greylock partner, 90′s), or “We look for the second time around” (Sigma partner, 90′s). It doesn’t take a genius to understand what they are saying. As much as possible, they want to avoid all innovation (stuff that’s not proven). It’s risky and unprofitable.
VC behavior subsequent to making an investment is also revealing. After looking at hundreds of deals, and falling in love with one particular business plan, and persuading other investors and partners that it’s great, VC’s generally don’t support subsequent changes to the business plan. A self-funded entrepreneur is constantly making major course corrections, to the point of driving his colleagues crazy. VC’s will deny this, but a VC investment is basically a ballistic missile launch, without course corrections. They are likely to just shut down the funding, or even to continue investing a lot of money in a concept that is clearly not creating the forecast level of excitement.