There’s a certain amount of cred you get with media and a few companies when you can say that you are VC-backed. The problem is VCs rob your soul and ultimately, your company. The process itself makes root canal look like fun, that’s for sure. The following passage from TapTapTap’s John Casasanta, who is apparently not a fan of the VCs, is right on:
In a nutshell, VCs will give you just enough money to get the ball barely rolling, but then repeatedly force your hand in later funding rounds (if you even make it that far). They’ll have you by the cojones and you’ll have no choice but to give up more and more of what you’ve built through your blood and sweat. And what’s worse, VCs typically bet on a large group of startups with the expectations that one will hit big (the 1 in 10 guideline).
Quite true. What’s truer is that when a VC senses that he won’t be able to have the upper hand with you (ie. control you), he will lose interest… because it’s the only card they have to play.
Here’s the essential problem:
- on the one hand, VCs push for high growth rates, which require high spending and waste.
- but by spending so much, even if the strategy is right and execution sound, chances are that you will run out of money sooner.
If you try to avoid running out of funds, they will fire you for not wanting to match their target growth rates… and if you do run out of money, they’ll invest more, which will come at a cost: your stake.
Dogster/Catster’s Ted Rheingold is more right though: invariably you might want to go the VC route, and that’s fine, but you should not rush to it, especially not prematurely.
Just remember one thing: you have a passion for something other than money, that’s why you started your company; VCs only see green, there is nothing wrong with that per se, but their objective is to maximize their money while minimizing resources, be it time, money or people, and that could include YOU!
- Why do Entrepreneurs Accept Draconian VC Terms?
- Biggest Mistakes Entrepreneurs - and VCs - Make.
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