Business Acceleration at Scale: An Interview with Sramana Mitra

Abstract

Most innovative businesses will never be funded by venture capital and are unlikely to emerge from corporate innovation functions. They just don't fit the investment criteria of venture capitalists or corporations. Sramana Mitra, a serial entrepreneur, author and mentor, and founder of the virtual startup incubator One Million by One Million, talks about how to unlock this potential by teaching people how to bootstrap successful businesses--inside or outside the walls of an established company. JIM EUCHNER [JE]: You have observed that venture capital, as a funding mechanism, only really works for a small percentage of startups. You wrote a book about the other 99 percent. Can you explain? SM: I spent many years in the venture capital-driven entrepreneurship world. I've done venture-funded startups as founder and founder/CEO, and I have raised a bunch of money. But the venture capital model is very particular; it fits businesses that are going to grow at a hyper-fast rate and that also address very, very large market opportunities, with total available market sizes of multiple billions of dollars. The universe of companies that fit these requirements is minuscule, but they get all the attention. If you read the popular entrepreneurship media, everybody assumes that entrepreneurship equals financing. I grew up in this world, and I kind of drank that Kool-Aid for a while. But I am someone who is curious, with out-of-the-box questioning tendencies. So I asked myself, what the hell is going on here? Over 99 percent of the businesses that come to look for financing get rejected! They get rejected for a very good reason; they don't fit this high-growth, hyper-large market size framework that drives venture capital financing. But many of these companies are perfectly viable businesses. The message entrepreneurs are getting is that if they cannot raise financing, they cannot build businesses. That is a completely wrong message. Many of the businesses rejected by venture capital are going to be perfectly fine $5 million, $10 million, $20 million, $50 million businesses. And these businesses need to be built. The problems that these businesses would solve need to be solved. I started asking, why have we created this myth that entrepreneurship equals financing, when in reality entrepreneurship equals customers, revenues, and profit? This is the philosophical underpinning of One Million by One Million, the virtual global incubator we have started. My observation is that numerous ideas bite the dust because entrepreneurs get discouraged. They spend 6 months, 9 months, 12 months banging on doors and getting refused and rejected; they spend all their energy, all their runway seeking funding. That results in a high proportion of what I call infant entrepreneurial mortality, and it doesn't need to be so. If you train entrepreneurs to focus on the right things--on customers, on revenues, and on profits--and you help them understand that venture financing is optional, then you can reduce that infant entrepreneurial mortality significantly. Many businesses are simply not fundable by venture capital mechanics, but venture capital isn't the only option. You can build the business organically and fund it with its own revenues. You're going to need to bootstrap, you're going to need to figure out how to build your product or deliver your service with small teams and get customers to pay money for whatever it is you're offering. The revenues you earn give you the resources with which to continue to build the business. That is the primary principle that drives over 99 percent of the businesses out there--that is a fact. Yet there is this myth that entrepreneurship requires venture capital, which is completely counter to the fact of the matter. This gap is what 1 chose to address with One Million by One Million. The name One Million by One Million refers to our mission, which is to help a million entrepreneurs reach a million dollars in annual revenue--which means a trillion dollars in global GDP and 10 million jobs. …