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Don't Take VC Funding – It Will Destroy Your Company

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Re: Don't Take VC Funding – It Will Destroy Your Company

#131

Post by yowlingcat »

j45 wrote: post #84
eastdakota wrote: post #22

You’re so right! It was an absolute disaster for us. Never do it!!!!! Kidding aside, it is true that raising money from VCs puts you on a very defined path with really only three potential outcomes: 1) failure, 2) sell to acquirer, or 3) go public. There are a small handful of exceptions, mostly for companies that throw off massive amounts of cash, but, realistically, those are the outcomes. If you don’t like any of…

There is an option #4 that I’ve been around a few times: build a shark that is doing the acquiring within 5 years. Superior tech, maybe hyper efficient, hyper profitable.

This model is interesting, and I've definitely been wondering about this a lot more in the new macroeconomy. Do tell more if you're up for it.

From my perspective, it's effectively the PE model except the funding source is the company's own revenue rather than investment capital.

Re: Don't Take VC Funding – It Will Destroy Your Company

#132

Post by tempusalaria »

franciscop wrote: post #115

> "The first and main takeaway is this: Companies which receive VC funding are not profitable." This is patently untrue and deceiving by the author, doubtlessly set to tell a narrative. Sure, some companies that receive VC funding are not profitable, maybe even most, but a sizable portion of the companies that receive VC funding ARE profitable. Denying this is deceiving the readers. In fact, the easiest way to receiv…

The majority of public VC backed companies are not profitable and those are the best of the group. Must be 90+% of VC backed companies are unprofitable, and that’s ignoring all the ones that just shut cause they can’t make money

Re: Don't Take VC Funding – It Will Destroy Your Company

#133

Post by jaysinn_420 »

XCabbage wrote: post #113

> VC Funding Means You Will Sell Your Company > Remember when I wrote earlier that the VC dudes definition of “making everyone happy” after investing in your company doesn’t mean making it profitable? So now you might ask: Okay, so what do my VC investors want? ... They want to make a lot more money. > ... > Now, all of this might be none of your business, you might think. But it is! Because now the inevitable conseq…

Because as part of the VC investment, they are also taking positions on the board of your company. Maybe enough of a position that they can oust you if you don't do as they "suggest". Also, one round of funding is rarely the end of it, and if you are demonstrating that you are not playing their game and trying to become a Unicorn, then you will not get a second round of funding.

Why do you think VC control is bullshit?

Re: Don't Take VC Funding – It Will Destroy Your Company

#134

Post by stocknoob »

XCabbage wrote: post #113

> VC Funding Means You Will Sell Your Company > Remember when I wrote earlier that the VC dudes definition of “making everyone happy” after investing in your company doesn’t mean making it profitable? So now you might ask: Okay, so what do my VC investors want? ... They want to make a lot more money. > ... > Now, all of this might be none of your business, you might think. But it is! Because now the inevitable conseq…

https://www.holloway.com/g/venture-capital/sections/how-vcs-...

Re: Don't Take VC Funding – It Will Destroy Your Company

#135

Post by smallerfish »

cj wrote: post #57

My favorite model is “seed-strapped” (a play on bootstrapped). 1) Raise $1-2 million (ideally from multiple small investors rather than 1 big investor, many smaller investors increases your control since every investor alone is too small to make serious demands about how you should run your business) 2) use the $1-2 mill to find product market fit and (more importantly) achieve profitability (or be cash flow neutral)…

Aren't VCs less likely to want to invest if they get wind that you're going to go this path?

Re: Don't Take VC Funding – It Will Destroy Your Company

#136

Post by j45 »

eastdakota wrote: post #130
j45 wrote: post #84

Earlier quoted context omitted.

There is an option #4 that I’ve been around a few times: build a shark that is doing the acquiring within 5 years. Superior tech, maybe hyper efficient, hyper profitable.

You still eventually need to return money to your private market investors at some point. So that just pushes the outcomes out later. Or, again, in the super rare case that you’re generating so much case that you can pay investors back at a rate of return they’re happy with with dividended cash flows.

I meant the ‘super rare’ case.

It’s not so rare in some industries like oil and gas, etc where cashflow is the purpose of the work.

Add software that does what nothing has before.. and the table turns.

Re: Don't Take VC Funding – It Will Destroy Your Company

#138

Post by [deleted] »

XCabbage wrote: post #113

> VC Funding Means You Will Sell Your Company > Remember when I wrote earlier that the VC dudes definition of “making everyone happy” after investing in your company doesn’t mean making it profitable? So now you might ask: Okay, so what do my VC investors want? ... They want to make a lot more money. > ... > Now, all of this might be none of your business, you might think. But it is! Because now the inevitable conseq…

[deleted]

Re: Don't Take VC Funding – It Will Destroy Your Company

#139

Post by blindriver »

onion2k wrote: post #68
eastdakota wrote: post #22

You’re so right! It was an absolute disaster for us. Never do it!!!!! Kidding aside, it is true that raising money from VCs puts you on a very defined path with really only three potential outcomes: 1) failure, 2) sell to acquirer, or 3) go public. There are a small handful of exceptions, mostly for companies that throw off massive amounts of cash, but, realistically, those are the outcomes. If you don’t like any of…

According to Statista there were 16,464 VC deals signed in 2022. There were 181 IPOs in that year. The most IPOs in a year ever is 1,035. Obviously the two aren't directly comparable, but the point I'm getting at is that an IPO exit for any company is really unusual. If you found a company and take on VC funding your exit event is much more likely to be getting acquired if you don't fail. It does happen, and deserved…

90% of all startups fail so the expectation of an IPO when you join a startup is insane.
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