But given the high cost involved to the entrepreneur, one might wonder why such seemingly bright and inventive business people would even approach VC's, let alone present ten times more business plans than get funded each year.
Entrepreneurs are a special breed.
Like many high school basketball players hoping to make the NBA, they often fail to acknowledge the odds against their success. Venture capitalists play to this weakness in providing them with a seemingly risk-free financial opportunity for pursuing their dreams. But beyond that, entrepreneurs approach VC's in large part because they offer an alternative business environment to the one most entrepreneurs are used to. As all basic research money comes from corporate or government funding today, entrepreneurs and their inventions typically spring from corporate or university environments. Given the limited pay structures these institutions offer and the effect corporate downsizing has had on employee loyalty, it's not surprising entrepreneurs turn to VC's who put no limits on future earnings potential.