$1MM Ticket To Nowhere - Part 1

One million dollars does not get you very far these days. Whether from capital raised from investors or by meeting revenue goals, the $1MM milestone is really just a ticket to nowhere. There have always been and always will be a handful of companies that build something absolutely amazing and achieve great things with little to no money to prop them up. However, there has always been and will always will be a far greater number of companies that take in a ton of investor capital and ultimately achieve very little or flame out.

One million dollars does not get you very far these days. Whether from capital raised from investors or by meeting revenue goals, the $1MM milestone is really just a ticket to nowhere.

There have always been and always will be a handful of companies that build something absolutely amazing and achieve great things with little to no money to prop them up. However, there has always been and will always will be a far greater number of companies that take in a ton of investor capital and ultimately achieve very little or flame out.

A veritable wasteland of companies have come and gone, many of which prove to be excellent learning experiences for entrepreneurs and investors alike. Unfortunately, many of these "wipeouts" did not need to happen or should never have been companies with funding in the first place.

In the quest to claim the next 100x investment, the venture capital model over the past few years has become severely distorted. I am sure that I am not the only person that sees a few companies every week and thinks privately: "Who the hell thinks that is a good idea?” or, “What makes anyone think that is a good company to bankroll?"  

There have been too many untested ideas, too many rock star developers without any business acumen, too many business folks without a clue about development needs, and way too many $1MM angel and seed rounds backed by me too companies in a previously hot space.  

Everyone seems to be lying to themselves and each other about the likelihood of success; which is evidenced by the ridiculous financial forecasts and ever-present hockey stick in every startups’ fundraising deck.

This brings me back to the $1MM ticket to nowhere. Now more than ever, raising $1MM of capital is a virtual guarantee to raise the next round. In addition, it’s a source of hope that you will achieve the metrics needed for a valuation in the next financing phase that doesn’t washout employee equity ownership levels.  

Check out Part 2 in the July edition of Envisions.

- Mike Nugent