Mark Cuban's First Rule of Success

Outspoken billionaire Mark Cuban starts 2008 with another great blog post. It's his first of a series of rules by which he has found sucess and that he uses to judge companies he invests in. Somehwat ironicaly then it's about not going after venture capital.

The Best Equity is Sweat Equity. Dragon's Den contestants should read this - or not because maybe there would be no show...

Most entrepreneurs tend to think in terms of what raising money means to them. How it can get them started? How many people they can hire? How much they can spend on office space? How much they can pay themselves? They forget to put themselves in the position of the person or company they are asking for money from. They think they are considering that person's position by making up numbers and calling them expected returns for the investor. If you only give me X dollars, you will get X pct back in X years. You will double or triple your money in X years. Any investor worth anything knows you are just making these numbers up. They are meaningless. Worse, if you tell a savvy investor that the market is X billions of dollars and you just need one or some low percent to make zillions, you are immediately kicked to the curb.

I'm not nearly a Venture Capitalist (yet), but I know to dismiss any business plan that includes "...is a 8 billion dollar market. If we can get even 0.1% of...". This implies that because a tenth of a percent is so low, it should be easy to get. HA! No one is giving up $8 million without a hell of a fight.

The reality is that for most businesses, they don't need more cash, they need more brains.