Marc, it is even tougher than you describe it.

I started a few businesses. Some of them with practically no money up front grew up organically. But some needed that angel investment. In the case I bring up in my text, a client liked what we were doing and became an investor. And a friend.

Most often that first investment comes from friends or family. With the shrinking middle class, fewer people have that $100,000 on hand, that they can afford to risk. My illusion was that angel investors would fill that void. I was wrong. These angel investor’s clubs are practically fund managers for a wealthy investors. When managing other’s people money, they are risk averse.

A friendly manager of one of these funds explained me in his email where my error was. He wrote: “I disagree with your premise. As a fund, our commitment to investors is not to find the “unicorn” or “next Facebook” as you suggest. Our commitment is to leverage “been there, done that” entrepreneurs by applying their experience to our selection process. We’re offering our investors a diversified portfolio of early-stage investment opportunities that meet a certain standard. There’s absolutely no way to pick winners at this stage of the game. You can only pick the Harvard class and hope that some of them succeed. And then support them along the way. Our fund product is designed to de-risk early stage investment through diligence and diversification. This way, investors don’t have to pick the next Facebook to get an ROI. We suggest that our investors choose at least 20 companies that we place on our platform to gain the ROI this asset class is capable of returning. We’re not looking for the next Steve Jobs — why would we? Once-in-a-lifetime entrepreneurs are just that.”

This sort of explains why Facebook has no serious competitors.

Lastly, why do you look for the next Facebook or Google only in Cleveland?

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Many tell us what we should think. I write to encourage my readers to think for themselves. I write to ask you to inquire. Question me. Have fun.

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