1Mby1M Virtual Accelerator Investor Forum: With Christopher Mirabile, Senior Managing Director at Launchpad Venture Group (Part 3)

Sramana Mitra: To be able to get to $20 million with $1.4 million, you have to bootstrap. That’s something we believe in and promote extensively. We are with you on this line of thinking. Like you said, these large funds can only invest large amounts of money. Otherwise, their human capital-to-capital ratio doesn’t work out.

Christopher Mirabile: They just can’t manage that many deals. It’s interesting. You read about large exits all the time. You think they grow on trees. There are a couple of dozen billion-dollar startup exits at most from 400,000 to 500,000 startups created in the US each year. Pushing an entrepreneur to a high-capital, big exit path is, statistically speaking, dooming him to failure.

The average M&A in the USA is well below $50 million. There are certain companies where you’d be an idiot not to go big on the capital. There are some that are serving a global market like Snapchat or Instagram. You’ve got no choice.

For many entrepreneurs, they’re better served by staging capital more thoughtfully and not locking themselves in. There are a lot of different harvest points. Often, entrepreneurs are better served by selling and letting a private equity or a venture capital take the business off their hands and going back and starting again.

Sramana Mitra: I was talking to an entrepreneur yesterday. This is his fourth rodeo. This time, he’s found product-market fit. It’s scaling and it’s going to be a unicorn kind of deal, but his first three ventures were bootstrapping to exit. He got small amounts of capital. Each time, he got tens of millions in exit. That’s a very successful career.

If you go back and look at my work, I’ve been promoting this point of view for 15 years now. It’s like pushing a rock up a hill because the TechCrunch-style media writes about unicorns and who raised the most funding. The problem is that the first-time entrepreneurs are learning a bad example.

Christopher Mirabile: Sometimes, I feel like a stodgy value-based investor in a momentum-based world. You will see VCs that never focus on exits. I hope their LPs don’t hear them say that. It’s nonsense. They say that exiting early is a crime against nature. Not if the market isn’t big enough. If all you have is a hammer, every problem looks like a nail. You just jam capital into every company. It might work out or it might not. It’s basically reckless disregard for the founder’s well-being.

Sramana Mitra: Another truism that I hate is go big or go home. That is such bullshit.

Christopher Mirabile: If the market is a truly massive market, it might apply. In many cases, you’re a couple of pivots away from a really big market.

This segment is part 3 in the series : 1Mby1M Virtual Accelerator Investor Forum: With Christopher Mirabile, Senior Managing Director at Launchpad Venture Group
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