Reflection one:
Want to become an entrepreneur that succeeds in the value of their business becoming a billion dollars, while remaining in control of their business? Then follow the advice from Dileep Rao in Finance Secrets of Billion-Dollar Entrepreneurs: Venture Finance without Venture Capital.
In his findings, Rao states that 99.9 % of ventures will not get venture capital and 80% of those that do, end up failing. Entrepreneurs that are finance smart and avoid or at least delay VC are the ones that keep the greatest amount of the wealth that they have created. Entrepreneurs that are not finance smart get venture capital early and then are replaced as CEOs and end up with the smallest proportion of wealth.
Rao describes finance-smart strategies as being business smart (opportunities and strategy), capital smart (financing and launch), and leadership smart (control, organize, leadership). One of his key messages: use finance-smart expertise to link your business and finance strategies. By linking the two, an entrepreneur can grow more with less and can finance for control.
Steps to link business and finance are listed as follows:
- Develop Projections Based on your Business Plan
- Test Your Concept to Reduce Risk
- Bootstrap to Reduce Needs
- Reevaluate your Implementation and Strategic Plan to Reduce Needs
- Re-examine your Market to Reduce Needs
- Rethink your Opportunities for More Advantage with Lower Needs
- Re-do your Business Plan with Capital Efficiency
- Raise Capital-Efficient Needs from Finance-Smart Sources
Without venture capital, Rao says entrepreneurs need to use their skill and passion to develop a competitive advantage. Even with fewer resources, passion helps entrepreneurs become better than their competitors. Cardon and Kirk (Hu, W., Xu, Y., Zhao, F., Chen, Y., 2022) concur with Rao as they found the following: Successful entrepreneurs often emphasize the power of passion. The path to entrepreneurship is full of difficulties. Passion is the driving force that drives entrepreneurs to continue pursuing their goals when encountering difficulties (Cardon and Kirk, 2015).
When I reflect on passion as a key component to becoming a successful entrepreneur, it just makes sense. In life, we tend to gravitate towards what interests us, what we’re comfortable with, what we get joy out of, what intrigues us, and when we find it, we want to know more and get more involved in it. It becomes part of us. We just can’t get enough of it. This is the drive I believe Cardon and Kirk are referring to. I also believe Rao is onto something with expressing how passion helps entrepreneurs become better than their competitors. I feel like one of my passions is learning. I consider myself a lifelong learner and am always wanting to learn from others, too. Do you consider yourself a lifelong learner? In what ways? How does this help you as an entrepreneur?
Stay tuned to find out more in the next reflection on Finance Secrets of Billion-Dollar Entrepreneurs: Venture Finance without Venture Capital.
References:
Hu, W., Xu, Y., Zhao, F., Chen, Y. (2022). Entrepreneurial Passion and Entrepreneurial Success—The Role of Psychological Capital and Entrepreneurial Policy Support. National Library of Medicine. National Institutes of Health. https://pmc.ncbi.nlm.nih.gov/articles/PMC8916239/#B5
Rao, D. (2020). Finance Secrets of Billion-Dollar Entrepreneurs: Venture Finance without Venture Capital. FIU Business Press, Mango Publishing Group.