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Learning Venture Capital from Venture Capitalists

October 19, 2006

Bessed is still far from seeking venture capital, if we go that route at all, but as someone who’s never been part of that world, I’m very happy to find the VCs who are willing to blog about the various issues companies face and what VCs look to fund (or not fund).

Fred Wilson and Brad Burnham at Union Square Ventures have one such blog that I’m keeping track of. I only recently found the site, so I have to go back through the archives, but I can already see this is a place I want to return to in order to confirm my ideas, have them shattered, or learn something that may be valuable down the road.

In particular, Fred Wilson’s post on “Traction” struck me—basically his message was that your company will have a much better chance of snagging investors if it can show some traction in the marketplace. This seems like common sense, but it’s easy to get entranced by your big idea and think you should go get huge amounts of money for it, even though it’s completely unproven and you can’t possibly predict how it will be received in the market.

(On the other hand, some of the companies I read about who get funded seem to have no traction and crazy business models. I assume they get their money due to a past track record or knowing the right people. I have neither of these advantages.)

Wilson’s latest post discusses why Union Square prefers to be the lead VC versus funding later rounds. For me it confirms my thoughts on what I’d want out of a VC. Not just money, but knowhow—someone who can help guide the business as it grows, and also help strategize new revenue sources. At Bessed, our main strategy right now is building the site, and building traffic—gaining traction—but once we have the traffic, we’ll need a team to help optimize profits from that traffic. It will take money to build out the team and more knowhow than I have to build the revenue stream.

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