When it comes to investments, I have had experience on both sides. While managing private equity and venture capital fund, I decided to provide capital to promising companies. Later, for the fund’s portfolio companies or as an independent advisor to the founders, I talked to investors looking to buy a business in part or in whole. From the intersection of different perspectives, I had an insight into how important it is to have a business vision that is real.
Many entrepreneurs don’t have a clear vision for their business at all. One explains it by the high uncertainty of the initial stage of building a business: “What’s the use of thinking far ahead when the company has an acute cash flow problem?”. The other is so bogged down in operational processes, from financial accounting to negotiations with clients, that it seems the company would fly off the rails if only he were distracted by "all those dreams. It’s all excuses. Formulating an effective business vision is not easy, but for another reason, related to the founder's willingness to honestly answer himself a series of existential questions. A separate challenge is to make sure that all employees embrace it and approach each day as best they can.
Usually, a vision is remembered when there is a great need to raise external capital. Going along with investment bankers and brokers, the founder agrees to a made-up investment story by them that will supposedly help sell his business faster. Yes, fabricated presentation materials about the company look tempting. An inexperienced investor might even take the bait, but making an amateur shareholder of your company is like setting off a time bomb. A seasoned investor at the first meeting will ask the founder a couple of direct questions, and this grand vision will melt like ice in the sun. To verify the testimony, the investor will also ask questions of the top managers. And if the business has no real vision, there’s no way to hide that fact.
For experienced entrepreneurs, however, the vision of the company is an extremely valuable working tool.
Yours sincerely,
-Alexander
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