> Maybe I'm being naïve here, but isn't it kind of crazy to raise 3.5M in funds for a business that has no plan but to be acquired by someone else?
That's pretty common, and is basically what seed funding is. The paradox behind markets and investment is that logically speaking, if a potential company has a profitable business model, that company should already exist. After all, with millions of potential entrepreneurs across the globe and trillions in funding chasing them, the chance that an obviously profitable business model hasn't already been dreamed up and implemented by an entrepreneur is basically nil.
So what investors and entrepreneurs do is they agree to take on risk with their capital, for the potential of great reward if it turns out they can come up with a better way of doing things that isn't already being done. The only way to do this is to explore virgin territory: do things that seem plausible but haven't currently been tried by existing companies, and then see if you can create a profitable business model with the results. There's a good chance that you can't, in which case okay, it was an experiment, you spent $3.5M to learn something that had the shot of being worth billions.
"After all, with millions of potential entrepreneurs across the globe and trillions in funding chasing them, the chance that an obviously profitable business model hasn't already been dreamed up and implemented by an entrepreneur is basically nil."
This basically amounts to "everything that can be invented has been invented". You sure?
Yes. And it's true, statistically. Most inventable things will be invented by someone else before you succeed at it. Statistically, no one wins the lottery, even though someone always does.
That's pretty common, and is basically what seed funding is. The paradox behind markets and investment is that logically speaking, if a potential company has a profitable business model, that company should already exist. After all, with millions of potential entrepreneurs across the globe and trillions in funding chasing them, the chance that an obviously profitable business model hasn't already been dreamed up and implemented by an entrepreneur is basically nil.
So what investors and entrepreneurs do is they agree to take on risk with their capital, for the potential of great reward if it turns out they can come up with a better way of doing things that isn't already being done. The only way to do this is to explore virgin territory: do things that seem plausible but haven't currently been tried by existing companies, and then see if you can create a profitable business model with the results. There's a good chance that you can't, in which case okay, it was an experiment, you spent $3.5M to learn something that had the shot of being worth billions.