Monday, September 1, 2008

To have skin in the game...

Back to work. How important is it to invest your own money into your start-up?

Well, there are no fixed rules about this issue, but most of the VC firms will ask entrepreneurs to invest some money into their project. Why? To show commitment, to demonstrate they believe in what they are doing...

There is a saying for this: "to have skin in the game". Having skin in the game, that is, having something to lose if things go down the drain is important, because it aligns very clearly the entrepreneur's goals with the investor's goals.

To have skin in the game is not necessarily related to money... if the investor perceives that this start-up is your plan B, for instance, you are dead, you won't have the money.

Or else if they perceive you have a plan B and you may leave the boat before success and you are not risking anything with the project, they won't see either the alignment they need to see in order to invest.

So, it is important to have this in mind... Just a quick reminder for all entrepreneurs!


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