VC money is not a curse

Disclaimer: Views and opinions expressed underneath are all mine. If you disagree with the title/content of this post, I am entitled not to be killed.

Image courtesy: Popfi.com

There are some amazing bootstrapped ventures I have come across – 37Signals, Github, VisualWebsiteOptimizer etc are a few examples of how passionate entrepreneurs can build and scale successful businesses without raising any external capital for their respective ventures. I respect these companies and the people behind them. They are role models for many including me.

However, believers of only-bootstrapped-companies-rock-and-the-rest-suck philosophy, leave no stone unturned in “cautioning” entrepreneurs about the side effects of VC funding and the potential damage it may cause to their interests once the business becomes successful. Lemme bust some myths for you –

Myth 1. Funded companies are all about fake business plans: Not really. Most, companies that managed to get funded would have tried pitching to several investors during their fundraising. As a startup or an early stage company, you are always selling and marketing – to your customers, to your co-founder, to your hiring prospects and to your potential investors. If you manage to “sell” your idea to someone other than yourself, it is a huge validation. And if that guy happens to be an investor, nothing like it. Business plan, as it may sound, is just a plan. Sure, it is. However, if you have the ability to create one, and execute it as well, you are the man everyone is looking for, to bet their money on.

Myth 2. Funded companies are all about overpaid teams and making losses: Maybe, because I know such companies. The problem with most of them is that they raised more than what they really needed. At WebEngage, against all advice, we raised the lowest possible sum we could, in our angel round. That helped us in a way as we were hungry throughout the year and yearning to make money. So we did. We are making money now. The urge to do so would have definitely been a lot lesser if we had too much cash in the bank already.

Myth 3. Funded companies are all about investors sitting on your board and driving decisions: Lemme tell you what is NOT a myth – there are very few angels/VC’s who add real value. A bulk of them exist to extract value. That said, when you bring in investors, you do so by selling your idea and vision to them. The reason they would choose to invest in you is because they believe in what you stand for. If you continue living up to your promise, there’s no reason why they would stop liking you. Investors are not aliens. They are your stakeholders. The serious and involved ones care about your business as much as you do. Having the ability to hear them out doesn’t hurt. You should also keep this at the back of your mind – nobody cares unless you are worth the attention.

Myth 4. Funded companies are all about more for investors and less for founders: There is only one way to look at this. Which one would you want to end up with – 100% of a $1mn company or 10% of a $100mn company? There’s no basis to either of these numbers. They are both bullshit and made up to make a case for my point. And the point is simple – whether you like it or not, you need to spend money on a lot of things to fuel your growth. Be it growing sales and marketing, hiring great talent or expanding across geographies, you need liquidity beyond your organic growth. I remember this advice a gentleman gave to me – “Most startups fail. Most likely yours will fail too. However, if you succeeded, make sure that you have made enough for yourself. You don’t want to work against all odds just for peanuts”.

Myth 5. Funded companies are all about sadist, not-so-cool people: How often do you think you crib about founders of well funded companies wearing suits at events? While there is nothing fundamentally wrong of them in doing so, yet, there’s no one who’d stop you from wearing shorts (without  underpants if you wish) to work or such events. You are the one who builds and nurtures the DNA of your company. Look at us – we are the fat-ass, ugly-looking and not-so-cool kinds. But then, we let our productpassion and commitment speak for us instead.

All this said and done, just remember one thing. Raising money is a daunting task. It takes a lot of your time and energy. Make sure you are fundraising only when you are ready to do so. All the best!

Latest Comments

  1. Anurag Anand says:

    Hi sir. I woke upto this post. You make my day. I will connect with you soon to show what’s brewing up. Thanks for being the help you are.

  2. Rakesh Soni says:

    Fundamental but important tips, will keep them in mind 🙂

  3. Chirag Chamoli says:

    I could hear this in the background 🙂

  4. Pranay says:

    Sahi hai boss! Love the ‘don’t work for peanuts if its successful’ mantra.

    Seriously though, its important also to realise that you should be wary of investor greed disguised as great advice. No matter they may want the best for you, but a successful company can get carried away on its own wave sometimes.

    Ofcourse as you have demonstrated on multiple occasions, having a firm belief and strong focus and value system helps resist such temptations.

    I have 1st hand experience of this. 🙂

    Best of luck,
    Pranay

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