7 reasons taking on Venture Capital may be a horrible idea for your Startup

Taking on venture capital means:

  1. You are getting a boss you’ll work for, without being able to quit, for the next 5+ years.
  2. You can’t control your salary, who gets hired/fired, or even you position as CEO. When you disagree with your investors on how to run a business, they often get their way.
  3. You will be pressured into growing until you can make a 10x return to the investors on sale/IPO, massively increasing your risk. Moderate level of success is incompatible with VC model, because the returns from 5% of successful investments have to compensate for losses on 95% of unsuccessful ones.
  4. Investors often need their returns within 3–5 years, so rushing to sale/IPO becomes more important than building a long-term quality business.
  5. You’re just getting started and you have no leverage, which is a horrible time to enter any business transaction — you’ll end up getting a bad deal.
  6. You’ll end up caring about your investors interests more than you care about building a product your customers want.
  7. Raising money is slow, uncertain, and very distracting. It takes months of effort, a time better spent building a great product.

Instead, consider bootstrapping a profitable product/service, getting profitable as soon as possible, and then using that money to fund your future projects or more growth.

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