There’s an old joke. One most entrepreneurs clearly understand. I’ve called it the entrepreneurial curve.

• A nascent entrepreneur is someone with a business idea and $ 1000 in the bank.
• A budding entrepreneur is someone with a business plan and a $ 100 in the bank.
• An entrepreneur is someone with a small business and a few pennies in the bank- until tomorrow.
• A successful entrepreneur is someone with a thriving business, employees, and owes the banks $ 100,000.
• Oh, and wildly successful venture is one with multiple sites, a couple of hundred employees, and owes about $ 1 million to the banks.

There’s more than just humor behind this. It’s why entrepreneurs- at some point in their careers- consider reaching out to venture capital. Oh, sure, they know it’s ‘vulture’ capital, but it’s that need for capital that tips the balance in the eyes of the entrepreneur.

But, you know, venture capital- contrary to what the venture capitalists tell you- doesn’t drive innovation. Oh, sure, it is the grease that permits folks with innovative ideas and products to move forward a little easier, a little quicker.

But, that would also assume that innovation only happens in New York City, in Silicon Valley, with maybe a touch of success in Boston and DC. Because that’s where most of the venture capital (VC)  firms exist. And, where most of them seek out their new deals.

Yes, it does mean that certain entrepreneurs move to those areas so they get noticed more easily. Back when we were in Charlottesville, we considered the idea of moving. (We actually had two corporate headquarters for a while- with the second one in California. But, our board of advisors advised us to steer clear of VC’s, since we really didn’t need to amount of money that was the sweet spot for venture investments- but would have to sacrifice the same degree of ownership!)

The other fact of venture capital is that most of these firms are pooling money from other investors that they have under fiscal management. Which means VC’s generally seek out the sort of  firms that are making incremental changes- not major shifts- and with markets that can be conquered in five years or less. Unless the more innovative firms seeking investment will offer greater ownership for smaller investments. But, even then, the VC focus is on short-term investments.

Sure, there are the unicorns- the few firms that garner tremendous valuations (Snapchat, Uber, AirBnB, etc.). These private firms have valuations of more than $1 billion. But, that’s why they are unicorns- hard to find (but not really mythical).

Most venture firms are targeting the same sort of companies. Now, you would thing the big push would be cybersecurity, based upon all the conversations in the media. But, this sector acquired about 1% of the venture capital proffered this year. Snapchat and AirBnB managed to garner 10X that amount of capital.

Which sector do you think will really have the bigger return on investment? Not next month, but in five or ten years?

That’s the problem with venture capitalists today.