VC Isn’t Everything
There’s a glamour associated with raising funds from VCs.
Sure, in the short term, it sounds great. You’re worth a fortune (on paper). You can tell your mates you’re the next Mark Zuckerberg. You get airtime on tech media. You might even find your name on a Forbes X Under X list.
But it’s all meaningless, really.
Building a venture scale business is fucking hard. And having VC investors is a total pain in the arse in many ways. Most normal people wouldn’t - and shouldn’t - do it. Rather than being top choice, raising VC money should, in some ways, be your last resort.
VC is a peculiar asset class.
Our job is channel capital towards things that are highly likely to fail but might, maybe, possibly become extraordinary companies. Outlier outcomes are so important - not because VCs are greedy, but because the maths of their entire industry fall apart if there aren’t the 100x winners to pay for all the write-offs.
What it means, though, is you’re opting to go down that path too as a founder. So you have to be ok with what that journey looks like, and the incentives that go with it. Building to a £50, 75, 100m business could be awesome for you personally, but it won’t touch the sides for most VCs. So expect to be pushed harder, and further out on the risk curve.
Take two potential outcomes for a company that’s 50% owned by the founder: a £50m exit at 100% probability or a £250m exit at 20% probability. Many founders may be happy to sell up, bank their £25m (£50m x 100% x 50%), and do something else. A VC, though, would much prefer to roll the dice on turning that £50m to £250m, even if the alternative is zero. Our incentives are to double down on risk in pursuit of huge reward - again, not because we are greedy (though some are) but because without it, the maths don’t math.
The truth is, that isn’t the right path for most founders and most companies. It takes a special kind of odd founder to be up for and aligned with the VC journey. Go down that route eyes-wide-open, and strap in for the ride.
VC really isn’t everything.