The returns of a successful investment are incredible. One of my early startups we have an initial investment from a firm just under $3 million – well 11 years later the company went public and achieved a market cap of around $600 million and a couple of years later was bought back private for $1.4 billion. You can just imagine how much of a return that $3 million produced…and that doesn’t even include the preferred shares and warrants they always get and able to convert at time of certain financial events…i.e. simplistic example at the time of an IPO it is not uncommon to see warrants that convert into common at some multiple below the IPO price, etc…

You are talking 100 million + in ROI from the right early investment like that. So if I VC makes 30 investments of $3 million for a total of $90 million and have 3 major hits they still get close to 3X their money back overall.

It is also important to note that VC firms rarely invest just once (unless it fails) and they tend to have their sweet spot of investment range and usually plan up to 5X their initial investment during their life of investing with the company.

First of all the vast majority of funding goes toward marketing and sales. Sometimes key executives are paid large sums but mostly the money is definitely used toward marketing. Until you try to take a product to market it is hard to fathom just how difficult it really is to get the word, get early adopters and eventually attain some level of profitable traction.

One thing that is key, is the management team – in fact it could be said that investment is in the people not the idea. Someone who has a great idea but cannot execute on it – will end up nowhere. Start-ups are all about execution.

Typically in a startup the founders are concerned with getting it “right”. That is to say getting the glitches worked out of their product, getting the message and vision to the rest of the world in a way that people can understand it and start to drink the kool-aid.

Once the vultures get involved (investors) you’re many times driven to deliver bottom line results – it is always important to achieve a solid and growing bottom however, depending on the stage of the technology or solution focusing on the bottom line could also ultimately be the kiss of death.

To be fair you can really get key and good investors in your ventures. They really can make a big difference but they also can be the biggest distraction of your vision. Then you have the board of directors to manage and work with – a lot of times you are trying to balance and juggle several different agendas.

Keep in mind that all investors are “big boys” and understand what they are investing in. Out of 10 major investments if 1 or 2 hit the investors are doing well. It is a numbers game and the majority of startups fail.

The majority of people just don’t understand how difficult it is to conceive, build and execute on an idea to something of substantial value.

Entrepreneurs have to be willing risk literally everything they have in their life to become successful. You’re talking on average 17 hours a day for many years with very few vacations, etc. Please understand when someone hits a homerun with their efforts has literally earned every single penny.

Another point that I can think…just when you think your company is going to fail is when you actually break-through and make it. This point definitely separates the “men from the boys”.