So if you have a proven & relatively predictable business model, aiming to a quantifiable market, that’s absolutely great – and assuming you got your facts right, you’ll probably experience less of that “black swan” effect. But not all companies have that. When you’re at a very early stage, or when building something that might be very disruptive or visionary, you might simply not be able to show an all-around fact-supported, quantifiable model. Does that mean your company suck? IMHO – of course not. Did early-stage Twitter suck?

Now, naturally as your company advances, uncertainty is gradually removed and you’re becoming more of a white swan really, and this obviously reflects on your fundraising efforts as well. (”White swan”… that almost sounds dull now, doesn’t it? ;-) )

So, my personal take on this is – Each company’s story is different. If your story requires many leaps of faith to believe in – it might mean your story is, ahmm, not so good. But it doesn’t necessarily mean so. Many of the greatest companies had such stories in their early stages. But do know what to expect when going to raise funds… And that’s, I think, what this great post is all about.

http://www.eetimes.com/showArticle.jhtml;jsessionid=Q10BQ1BIXFJ4CQSNDLOSKH0CJUNN2JVN;?articleID=212001953

This model seems more suitable for modeling the VC investments rather than startups seeking funding.

I have seen very few successful ventures with one founder. Someone needs to balance you out, someone needs to bust up your BS, someone needs to keep you from drinking your own Koolaid.

In addition, from my personal experience, it is also extremely important that your partner _at home_ is also supporting you like a co-investor and a co-founder. If you have that support, your energy will be spent much more efficiently and you will have less distractions.

A White Swan is a very rare site on our main city river, appropriately named “the Swan River”, whilst Black Swans are in abundance.

It’s one of the symbols of our State of Western Australia.

Alas the funding is not as common as the Black Swans here. When we raised money for our Web 2.0 start-up Vibe Capital 3 years ago, it was one bite from over 25 presentations to local investors that secured our full Series A funding.

Am enjoying the Venture Hacks feed very much.

In this economy, strategy 1 is the way to go: bootstrap as long as possible, stay focused on building your product, and Get Optimistic!

Normally I enjoy your posts very much but I find a large weakness in the argument put forth in this post.

About a black swan you are positing from an individual frame of reference and saying that after a set of repeast observation of NOs one day an entreprenuer hears YES and that happens for reasons that he knows little of or has control over. But IMHO this has nothing to do with question of a black swan except that this highlights the random nature of the fund raising process.
A funding happening ( not an individual but to any individual) is not an improprable event as there are many past occcurences and thus funding event cant be classified as a black swan.
Black swan is not about vagaries in difference about individual sets of observation but an argument against generalization and principles of induction.
A black swan is an unanticipated outlier which cannot be known apriori.
Ofcourse the entire venture industry thrives on the finding black swans and if you argue that funding of A startup is hence a black swan then it might be more acceptable.

This post is centred around funding of a startup alone which is really means to end and the ultimate huge google like success of a startup is the real black swan which matters and more valuable even if you found the funding black swan or not.
Thus I would rather say that a google ( a huge) like success for a startup is a black swan.

Given all this the best approach is to choose option b) where you minimize your downside and maximize your upside while option a) requires you to have Warren Buffet kind of discipline which is very hard as it might consume years and decades and option c) would require you to tread like a quant trader building and tearing hypothesis models about world of business but it still leaves exposed to a lot of downside risk.

There is *plenty* of prior information available for obtaining investment funding.

Second, I really object to the “woo-woo” mysticism you imply that it takes to obtain investment. It’s as if you’re saying, we’re not sure what makes a successful venture, but if you try enough, you might get lucky. VC are the cosmic money slot machine. Pull the lever enough, with enough stick-to-it-ness, and funding might come.

Now not that all investors are rational, but they *do* consider relevant prior information like market prop., team, competition, economic environment, etc. – even if it is in an ad hoc rather than structured manner.

Bottom line, raising money is hard. It can even be a low probability event. But that doesn’t mean we don’t have any idea how or why or when investment happens (a true Black Swan).

Also, Bin Laden had tried to take out the WTC before. Islamic terrorists had been known to hijack planes and the fairly often blow themselves up to make a statement. We may have been surprised by 9/11, but it’s a stretch to insinuate that it was an event for which we had no prior information.

The VC’s are going to ask you or think the following (can you answer these questions :

1. How will you make money? Can you tell the investor why this is a new and innovative BUSINESS (forget about the technology)?

2. Why are you uniquely qualified to run the business?

3. Do you have experience in operations (hr:hiring/management/firing, setting up offices/server centers), experience filing patents and trademarks, bookkeeping/accounting/purchasing,

4. have you managed an out sourced operation?

5.What is your business model?

6. Have you started a company before?

You better know the VC’s if you want to get funding in this environment. Your friends who are VP’s and CEO’s will be reluctant to make intros because they are scared of their own shadows. VC partners will take meetings with guys they know. If they do not know you they will have you meet with an associate whose job is to fill up a calendar with meetings with startups. Making it past the filtering mechanism is unlikely. The game is rigged.

Tell it like it is guys. There is a low probability of finding the black swan without the right connections. And if you do you will get the meeting with the partner they will give you the usual list of objections. VC’s who will tell you that they need to see more traction (reduce their risk), want to see you find a CEO (isn’t that their job?), want to have their expert perform due diligence (so that one of their portfolio companies can steal your idea…Hewlett used to tell his engineers “you are the expert”…), they don’t understand the inflection point when there were three other startups with worse technology and biz plans just funded because the founders are big name mangers from big companies who have no clue about how to build a business and probably were forced to leave their last job.

Optimism is a double edged sword that can take you over a cliff because you will waste too much time fund raising. Being realistic and assessing whether your idea is fundable is much more important. Otherwise you will be chasing rainbows instead of black swans.