It’s a commonly held belief that venture capitalists are risk takers, willing to gamble on new ideas. My experience is just the opposite. Ideas are dime a dozen and in themselves make people poor more often, than rich.  To paraphrase Bill Clinton: It’s the execution, stupid!

The value is there with the people who can execute ideas.  Best if the idea is borrowed or not new, in which case the chances are higher that the dead end streets had already been trodden by the less fortunate explorers, leaving cost efficient lessons for the execution specialist.

But, back to VC’s and idea-investing.  This is certainly a myth in my country, Hungary.  Here hardly anyone invests in start-ups, other than 3F investors (friends, family and fools). The latter category includes dummy money, being grant funds from the EU or the government. It pains no one if lost, but might make its promoters rich… in the unlikely event that such “investments” ever make a return.  It was refreshing to listen to a sober entrepreneur last week, who walked into my office and explained that whatever asset he had bought with EU money is worth only half what it cost.  An example is deep freezing plants, of which many were built from EU grants creating an oversupply and driving down resale values to the hard equity portion.

So how do VCs invest?  Sure, there has to be a sexy investment story, but the decision is ultimately down to the personalities behind it. If the entrepreneur is credible, VCs will chip in. If not, than no matter how good the idea, the moneymen will stay cool.  Even in Silicon Valley, the fast money is for serial entrepreneurs, who had already proven that they could build sellable, IPO-able companies. The due diligence is on people first, ideas second, (numbers third).