Taking VC money

I believe there’s a bit of an aura of raising VC money. It functions as a validation for your business idea and gives you a bit of breathing room as you grow your company and hopefully find product-market fit. Undoubtedly, a lot of businesses will need VC money to grow. Those businesses are typically in software where you need to hire a good amount of engineers to build your vision.

Taking VC money definitely has it’s upsides, but carries it’s downsides as well. Most importantly, you’re giving away a chunk of your company and inviting another “boss” into your life. VCs look for significant upside and you will need to grow the business significantly for them to meet that upside they are looking for.

Quite often, I read through a deck for a company looking for investors or meet a founder looking for investors and have no idea why. It’s becoming more and more common as the aura of VCs grow. A lot of companies are making strategic mistakes really early on by taking on VC money when they really do not need to.

A lot of these business ideas that I see are not capital intensive and can be bootstrapped or funded via a small business loan. These companies will be much better off in the long run operating as sustainable businesses versus the growth at all costs that a lot of VCs have typically searched for.

Not every business or company needs to have a significant exit event by like an IPO. As a founder, you may not get the halo effect of being a VC backed founder, but you can still run a very successful business and retain the majority of it and it’s future profits.