VC weighs in on bootstrapping leanness

Filed in archive Bootstrapper Tips on October 21, 2006

And lest I be accused after the past two posts of being too stridently anti-investment, consider what one Venture Capital advisor had to say about the importance of leanness to investors while commenting on a previous post.

James Chen, senior advisor for CXO Ventures, Sacramento, CA, and a director of CXO Private Equity and American River Capital Group pointed out:

Most people starting a new business tend to think that they should "appear" larger than they are - renting an office space, getting a mailbox address, hiring someone to answer the phone, having a jazzy website.

I tell all entrepreneurs the same thing - do not waste your time and money appearing larger than you are. We will find out what is behind the smoke and mirrors no matter what.

When choosing entrepreneurs to invest in, Chen says:

We actually favor entrepreneurs who don't have an office, only use their cell phone, and outsource or hire sparingly.

Why?

... a good entrepreneur knows that what matters the most is the real business, not the appearance of the business. If you look at Ebay as an example, you will see one of the most well run and profitable web companies with perhaps the ugliest and most horrible looking website! Functionality is sufficient and they are smart not to mess with a good thing.

This can even be important when it comes time to sell your business, Chen says, adding:

...when it comes to selling your business, your acquirer will take a close look at your debts and future obligations. No lease? No full time employees? No contracts? All great things that will make the transaction occur very quickly.

Chen also has a blog called "PureVC: A blog about venture capital, private equity, technology and the markets..."

Thanks for the comment!