VC Cliche of the Week

I can’t tell you how many times I have heard the phrase, "its binary, either we succeed or we fail".

Mostly its used to justify some kind of risky financial move, like borrowing a bunch of money instead of doing a safe but dilutive equity financing, or taking on a big lease, or licensing some technology that has large payments out in the future.

The logic goes like this.  It really doesn’t matter what the terms of this deal are because either we make it and the cost of these deals will be manageable, or we don’t make it and we go under and we don’t have to worry about these payments in the future.

But I am telling you that every time I hear this line of reasoning come out of someone’s mouth, I cringe and feel like running away.

Because nothing is binary.  It’s naive to think that way.

The truth is "making it" is an evolutionary thing.

I’ve never seen a business plan executed exactly like it was drawn up on paper.

The best entrepreneurs get into a market and evolve, weave and bob, and get where they want to go with a few twists and turns.

And it always takes more money and more time.

And so when you buy into this "it’s binary" thinking, you are making a huge mistake.

Because just when the bills start coming due, at a point when you thought you’d either have "made it" or not, you will actually be in the middle of your second weave and bob, with not that much to show for it, but lots of promise.

And then the bills will crush you, make it impossible to finance the company, and you’ll be hosed.

I’ve seen this movie and its always ends badly.

Because nothing is binary.

#VC & Technology