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Analyticsindiamag
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Dear Investors, Our Failure is on You: Startup Founders
- Healthcare startup, Olive AI, has shut down due to rapid, unsustainable growth and strategic miscalculations despite significant funding from high-profile investors and reaching a valuation of $4 billion in 2021.
- According to data, several AI startups backed by trustworthy investors have shut down over the past five years, highlighting the impact investors can have on startup success.
- Khosla Ventures founder, Vinod Khosla, has stated that 90% of investors do not add value to a company, with 70% of them adding negative value as they have not earned the right to advise an entrepreneur.
- The rise of AI startups has transformed VC firms investing in these companies, and expectations of VC input has evolved alongside this trend.
- The relationship between VCs and startup founders is vital, with questioning on the part of the VC being perceived as an important aspect of the former's involvement in the latter's company.
- VCs tend not to interfere with the business side of a startup, but they can influence a company's direction and strategy through their input on the board, which can lead to friction with founders.
- During risk-driven decision-making situations, it is desirable for the entrepreneur to have a calming board rather than one which adds to the stress.
- Conflicts between VCs and founders regarding involvement and ideas are largely the reason for ineffective performance results.
- 70% may not be the absolute number regarding the percentage of VCs who negatively impact a company, but conflicts arising from a mismatch of expectations are often the cause of friction.
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