Jay Sachetti joined Jeff O’Brien, partner at Husch Blackwell and Dyanne Ross-Hanson, president of Exit Planning Strategies talked about the market for mergers and acquisitions, exit planning opportunities for companies that don’t end up for sale and how companies can maximize their eventual sale price during an early October panel at the first Upsize on Tap event at Summit Brewing Co. in St. Paul.
When the state Legislature passed a law requiring employers to provide paid leave and safe time for employees, Justin Bieganek started hearing differing details from friends, colleagues and peers.
Business owners might want to think twice before chasing financing from venture capital firms, according to one local author.
Dileep Rao is a Twin Cities-based author, speaker and professor of entrepreneurship who has taught at Stanford, Harvard and the University of Minnesota previous to his current gig at Florida International University. He says the thought of raising venture capital to build your business might be better than the reality.
He researched business owners who built their ventures to $1 billion in both sales and valuation and discovered the ones who took home the greatest value for their work most often waited on seeking outside investors.
Rao shares the entirety of his findings in the new book, “Nothing Ventured, Everything Gained,” but offers a preview in this interview with Upsize’s Managing Editor Andrew Tellijohn.
The conversation is edited for length.
Tellijohn: Are you suggesting entrepreneurs should stay away from venture capital?
Rao: Yes and no. Basically, what I found in my research and present in the book is that if the goal is to build a big business and to keep control of the venture and the wealth created you may want to look at how you fit with venture capital.
There are three kinds of $1 billion-entrepreneurs. One kind sought venture capital early. The second group sought venture capital late. They needed it because they had a capital-intensive strategy. The third group never got venture capital.
Only 6 percent of the $1 billion-entrepreneurs got venture capital early. By getting it early they were basically shunted aside and somebody else ran the company. The group that got venture capital late was about 18 percent. About 76 percent never got venture capital. The ones who got venture capital late were people like Mark Zuckerberg, Bill Gates and Jeff Bezos. They had taken off without venture capital, so … you didn’t have to guess whether they have the skills. So, V.C.s invested and let them run the company.
The third group, locally, includes people like Richard Burke, who built UnitedHealth Group; Robert Kierlin, who built Fastenal and Dick Schulze, who built Best Buy. They used special strategies to grow without venture capital and they had skills.
Tellijohn: Do skills and strategy beat venture capital?
Rao: Most of the time. In some cases, you may need V.C. I only found one entrepreneur who beat V.C.-funded ventures without venture capital and that’s Michael Dell. He built Dell even though he had competitors who had some venture capital.
The brilliance of his strategy was that he got money from his customers before he had to pay his vendors. The more he grew the more capital he had. He consolidated that advantage by buying his inventory after someone ordered it, which meant he was customizing the computers so people would pay more. It was truly a brilliant strategy.
Tellijohn:Why is there a belief that entrepreneurs can’t do this without venture capital?
Rao: V.C.s have inundated the airways with the fact that they have invested. So, the moment a company goes public with a V.C., the moment it’s sold at a good valuation, who do you see on CNBC? The V.C. behind it saying ‘hey, I was the genius behind this.’ It’s in their best interest to boast about their exploits because they need to raise money for the next fund. There is nothing in it for the entrepreneur. If somebody has made $1 billion or $2 billion from their venture, many of them really don’t want to publicize themselves. Why open yourself up to all kinds of scams and lose your privacy?
contact:
DILEEP RAO,author and professor of entrepreneurship at Florida International University:
dr**@*mn.edu,
www.dileeprao.com
The use of fractional executives — those hired by companies on contract to work a fraction of the hours at less cost than full-time hires — has been on the rise for years. That accelerated during the COVID-19 pandemic. John Arms, co-founder of Voyageur U, helped establish the organization to help educate free agents on what it takes to make it as a fractional executive. He’s now put that knowledge into print, recently releasing the book “Consult Your Way to a Full-Time Job.” Arms joined Upsize Minnesota Editor Andrew Tellijohn to talk about how the book can help potential fractional executives carve their new paths.
Branding expert Kate DiLeo wrote a book about how branding agencies need to do less storytelling and more listening to better meet their clients’ needs.
