How Long Should A Good Venture Capital Proposal Be?

Do not expect or accept an answer steeped in absolutism, there is no single formula or replicable model for success, nor a 10-step plan to mastery like you see paraded around by the pageantry of incubators and startup helpers who rarely have produced innovation themselves the world cares about.

Every startup opportunity has its unique upside, downside, risk, time-to-money, and critical success factors needing to be assessed and agreed upon individually, and entirely on its own accord.

An excellent proposition to a venture capitalist is based on an understanding by startup entrepreneurs what the goals of a venture firm (VC) are, and specifically, the fund is, in addition to the performance of the general partner within the fund (lots of dark mystery there). Unfortunately for entrepreneurs, the vast majority of venture firms have turned subprime. And they are thus leading to a destructive impact on innovation, with a fallout of all too many false positives from subprime and false-negatives of prime. All the more reason to wade through this venture morass carefully and deliberately.

Many venture funds, despite their pretense of the opposite in actuality, deploy micro private-equity risk to produce venture style returns desperately. A fundamental incompatibility and improbability. A reason why despite the massive greenfield available to technology innovation, venture returns have not moved the needle of asset-management yield and asset-class allocations over the last twenty years. Venture, for precisely the reason mentioned above, still does not deserve a larger allocation from limited partners (the investors in VC) than a single-digit percentage of all assets under management (AUM). Alas, venture capital has a bad reputation because its wildly perpetuated risk profile has become fundamentally incompatible with the outlier propensity of groundbreaking innovation.

So, your first order of business is to assess what kind of innovation you are proposing to build a viable and timely business around. And then to find the right investor for what I hope is a Formula-1 race-car of a company that is currently being built in the garage. The only kind that can produce venture style returns limited partners are promised.

The point is, what most people today cheaply consider as innovation is merely a temporal downstream optimization from a suboptimal technology past. Ready to serve the hungry appetite of a majority of subprime (or wannabe) investors, who are eager to sell their new hot-potato to a chain of “greater fools,” with the innocent public as the last to realize valuations do not live up to socioeconomic value the world cares or should care about.

A proposal of selling subprime innovation to investors is fundamentally different in composition to that of prime innovation – a difference akin to a regular car versus a Formula-1 car. Both have four wheels and an engine, but that is pretty much where the comparison ends.

Selling a prime opportunity to an investor requires such innovation to be based on an upstream normalization of truth that during implementation surpasses and obliterates all previous downstream applications. Hence, the only investors understanding the intrinsic value of upstream innovations are the ones who understand that such prime innovation has no precedent, its merit cannot be derived from statistical analysis, its future dramatically enhancing humanitarian values and is based not on what the world is today or wants to regurgitate, but what it instead can and must be.

A proposal to a prime investor, therefore, revolves around a fundamentally different exploration of values, with lasting and renewable humanitarian values driving the viability of timely returns. A proposition less dependent on time and downside protection. Instead, its risk profile hinging on the propensity and strength of upside to break the norm.

So, to wrap this missive up, the length of a proposal to investors not only depends on the unique proposition you are selling but also depends on the classification (subprime or prime) of the innovation in question.

And lastly, keep in mind, if you are selling shares of a company prepared to change the world, you must “marry well.” Up – not down – with regards to the investor you are speaking with. Meaning the length of a “good proposal” is based just as much on your satisfaction with the investor as vice-versa. I have walked out on investors when I found they could not wrap their heads around upstream.

As an entrepreneur, having raised $14M in pre-money and produced well over $100M in returns, I suggest you study my startup-lessons I have written for more than 12 years. Available for free, sans advertising, and with no-nonsense. To prevent no real entrepreneur with prospective prime innovation sinks in the debilitating morass of subprime innovation arbitrage.

Join Georges October 27-29 in London, at the 2021 Climate Change Forum.

Let’s lead the world by example with new rigors of excellence we first and successfully apply to ourselves.

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