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CEO: If you take VC money, you’re a gambler, not an entrepreneur. Really?

November 26, 2012 11:02 am by | 2 Comments

Many “entrepreneurs” developing apps and websites don’t actually deserve the title of entrepreneur, says actor-turned-CEO Loren Feldman. Feldman, known for producing over-the-top, sometimes offensive videos for his company 1938 Media, proposes that a real entrepreneur takes a great amount of personal risk with a new venture. Taking money from a VC, then, makes a founder a gambler, not an entrepreneur.

“You’re not putting your ass on the line; you’re basically gambling,” he says. “All you’re doing is speculative development, hoping that maybe you’ll get acquired [...] It’s really disingenuous to say that you’re a risk-taker when there’s really no risk involved.”

Companies that have business loans they have to pay back are the real risk-takers, he says.

“If you go out of business, what happens? Nothing. You don’t have to pay VC money back, do you? You just go out of business, they take a write-off and that’s that,” he says. “Maybe (they) get teased on Hacker News.”

Feldman isn’t talking specifically about the health sector, but several digital health companies including Doximity and ZocDoc have taken VC money and are subject to his criticism. Drugs and medical devices are a different beast because they generally require much more capital than a digital health startup, but I have seen it done without VC money, and that’s why I think Feldman has a point.

Two companies come to mind immediately – Glenveigh Medical and Micropulse Inc. – and they come to mind because their founders were some of the most passionate, motivated and forthcoming CEOs that I’ve encountered.

That’s not saying that VCs don’t fill a necessary void or that companies who take money from them aren’t doing great things. They absolutely are. But people who start and grow a profitable business with money they scrounged together from family, friends, banks and whoever else would loan them some, are the real embodiment of entrepreneurship.

That’s why the term “serial entrepreneur” makes me cringe when it appears in a CEO’s bio or LinkedIn page (although, admittedly, I’ve written it probably more than a few times). Doesn’t adding the word serial take away some of the esteem associated with building a successful business from the ground up? It brings to mind a serial dater – someone who does the same thing repeatedly almost without real reason or passion. These “serial entrepreneurs” are good at what they do, but doesn’t that make them more businessmen than entrepreneurs?

I’m interested to hear some thoughts from the entrepreneurs and investors out there. Share them in the comments or on Twitter @medcitynews.

Hat tip: Phil Baumann via LinkedIn

Copyright 2014 MedCity News. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Deanna Pogorelc

By Deanna Pogorelc MedCity News

Deanna Pogorelc is a Cleveland-based reporter who writes obsessively about life science startups across the country, looking to technology transfer offices, startup incubators and investment funds to see what’s next in healthcare. She has a bachelor’s degree in journalism from Ball State University and previously covered business and education for a northeast Indiana newspaper.
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2 comments
Kresimir Peharda
Kresimir Peharda

While Mr. Feldman has a point blanket statements are usually wrong.  Sure some CEOs raise VC money with little intention or understanding of how to build a viable [profitable] business.  Nevertheless that does not mean any entrepreneur who takes VC money is pullin a con.  In healthcare, there are some valid reasons to seek  funding.  For example, long sales cycles, resistance to change, or market speed requirements are all legitimate reasons.  The finessed point is this: would be entrepreneurs who take VC money with no current plan to achieve profitability, or no roadmap to uncover profitability in the near future are certainly gambling with OPP.

tbeckett
tbeckett

@qthrul Been saying that for years. If the primary feature of your biz plan is exit strategy, it's a financial play, not entrepreneurship.

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