The Case of Hype Vs. Reality

The past can tell us a lot about where we are going. The past can also pre-sage history and fortunes to be made. Its mistakes and miscalculations can also be repeated. Nowhere is this truer than in business.

Believe it or not, you are neither the first nor the last entrepreneur who is destined for success, destined for failure or if you’re lucky, destined for both.

Yet, with the aforementioned resurgence of VC funding that is expected in 2010, you may think you can be the next Facebook, the next Amazon.com, the next Twitter, the next hot shot initial public offering, raking in the bucks. Or maybe you want out before the scrutiny. Maybe you want to be the hot new private VC darling with more rounds of funding than a drive-thru ATM in the parking lot of  a NASCAR race.

Think again.

Hype for an idea, the latest craze, the next killer app, the next breakthrough technology, can only last so long and only be ingratiating to a point with only so many businesses.

One need only consider the tech boom of the late 1990s and post-millennial “oughts,” as well as the housing boom – everybody was a real estate mogul weren’t they –  that helped create the latest Great Recession.

Don’t be part of the herd even if that herd appears to be blinging all the way to the public markets. Back your idea and zeal up with an actual revenue model and an intelligent trajectory to eventual profit and return on investments (ROI) for early funding entrants in your business.

Get it on paper now. If not in practice, in well-contrived theory. There are only so many hotnewidea.com’s and lastestcraze.net’s and “Trendy Inc.” companies that will slip through the cracks and make a few people rich as well as leave a lot of investors with rabbit ear pockets.

Still think what you have is new? Good,  but consider a 2004 Current Issues – that’s current issues – article by the New York Federal Reserve.

In the article, authors Stavros Peristiani and Gijoon Hong say the tech boom of the 90s that saw thousands of IPOs of companies with little or no earnings potential wasn’t a new phenomenon.

As far back as the early 1980s, the report says, pre-initial public offering private small businesses were showing signs of financial weakness and ill-timed public floats.  Then as it is now, a clearly demonstrated revenue and profit stream is essential.

Current issues indeed.

About the Author
Jabulani Leffall, 33, is an award-winning journalist and writer who attended Journalism School at the University of Missouri. His work has appeared in the Financial Times of London, Dow Jones Marketwatch, The Baltimore Sun, Investor's Business Daily, Variety, CFO Magazine, Compliance Week, Redmond Magazine, Black Enterprise, the Los Angeles Business Journal and the Los Angeles Daily News among other publications. He has been a George Washington Williams Fellow for the Independent Press Association where from 2002 to 2004 he studied the effects of subprime lending on poor communities. After what happened in 2007 and 2008, he feels vindicated as a journalist for having called what was going to happen. What else? Yeah, he also contributed vital research to the 1998 book University of Missouri History Professor Robert E. Weems, which is titled "Desegregating the Dollar." Additionally, he has appeared numerous times on ABC World News and CNN as a commentator of business and world affairs, again pretending to know what the heck he is talking about. Mr. Leffall is currently a the Associate Editor of Special Projects and content with FactSet Research Systems News and Media Relations Group. Lastly for the part where Mr. Leffall lives, he resides in a four cornered room where he stares at candles and his mind plays tricks on him. Read his articles and blogs please lest he go completely mad.
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