Venture Capitalists, Chickens and Eggs

Don Dodge had an interesting post the other day that speaks to an issue front and center in my mind: Venture Capitalists and Angels invest $40 Billion per year but see only $18B in exits. Why is that?

Venture Capitalists are an interesting breed. They sit on a pile of money, keep it warm and look for the next sure thing to hatch. Most often the next sure thing has already hatched and is busily rewarding the investors who helped them get their start as they make one of life's nicer choices: Acquisition or IPO?

In other words, there are no sure things. It's all about the risk.

So what to make of VC firms that look to 'add value' to a company already making money, but not really big money. Who doesn't want to make really big money, right?

TeamDirection would like to break into the big money stratosphere just as much as the next company, but at what cost? For instance, we are currently building our inside sales presence and becoming more customer facing. Before, we relied on Groove Networks to handle the heavy lifting of Sales and Marketing. This was a nice arrangement as we could focus on some heavy technology-- merging distributed sets of data into one cohesive whole. Presenting multi-user applications in a single steady state to all users. Non-trivial tasks we had to make easy.

This is not to toot our own horn (much). Sales and Marketing are just as difficult and hard-- technology people like myself just don't know it yet. (When they start their own company, they figure it out!) Honestly, it would be nice to have help now and then to build an internal sales and marketing organization. For me, this is the siren song of the VC.

You know technology, We know sales.

Remember back in the day when people were up in arms over rock music being played backwards on phonographs? Even in 2007, it can still be fun thing to do-- especially for VC siren songs. Play this song backwards and you get:

Show us your chicken, and we'll show you our eggs.

It's really odd, but it seems the more successful TeamDirection is becoming, the more VC phone calls I'm fielding. The latest pitch was, in essence:

If you build a successful inside sales and marketing organization, we can help you build a bigger sales and marketing organization.

Hmm.. well, I'm starting from scratch and building something out of nothing. It's kind of like that old tune about becoming a millionaire (I'm not-- I'm referring to Barron's popular refrain):

The First Million is the Hardest.

I'll lay it out straight-- at this point I'm much more interested in getting help building a successful sales and marketing team than applying MBA measurements and improving a successful sales and marketing organization.

Now that is worth a reward, and a lot of chickens, in my humble opinion.