DO NOT Raise Venture Capital Until You Watch This

VC Basics

Venture capitalists seek exponential growth, expecting companies to 10x or 100x their valuation every 18 months. Chris Saad explains that VCs look for global ambition and rapid scaling, often leading to either significant success or failure 1. Rob Walling introduces the 1990 rule, suggesting that only 1% of startups should pursue true venture funding, while 9% might consider alternative funding sources, and the remaining 90% should bootstrap 1. He emphasizes the importance of building a great business before seeking funding, as the best slide deck is a revenue graph trending upwards.

The best slide deck when you're gonna raise funding, the best slide deck is a revenue graph that's going up into the right.

--- Rob Walling

Yaniv Bernstein adds that taking venture capital is a one-way door, a permanent decision that significantly alters a company's execution strategy 2.

   

Risks of VC

Taking venture capital involves significant risks, including high growth expectations and potential failure. Rob Walling advises founders to bootstrap as long as possible to maintain optionality and avoid the permanent changes that come with VC funding 3. He shares that many companies implode under the pressure of venture capital, which changes the way they must execute 2. Yaniv Bernstein emphasizes the importance of careful decision-making, as taking VC is a one-way door that can limit future options.

Once you take venture funding, usually that's a one way door. Per Yanov's comment earlier, you just cut off certain exit routes.

--- Rob Walling

Founders should consider their personal circumstances and the type of business they are building before deciding to seek venture capital.

   

VC vs. Bootstrap

Comparing venture capital with bootstrapping, Chris Saad suggests that founders should aim to build a bootstrapped startup first, then pursue venture scale if appropriate 4. He warns against waiting too long to seek funding, as it can lead to missed opportunities 4. Rob Walling highlights that bootstrapping allows founders to retain control and flexibility, while venture capital often forces a narrow path to a big exit 5.

If you take, like, big venture from proper VC's and you only have this visualization where you're in a tunnel, right, and there's all exits along the side, and the more money you take from VC's, the more of those exits you're sealing off.

--- Yaniv Bernstein

Ultimately, the decision depends on the founder's intent and the specific goals they have for their startup.

   

Stage Considerations

The stage of business development plays a crucial role in deciding whether to seek venture capital. Rob Walling notes that SaaS companies have the luxury of optionality for a long time, while hardware or biotech startups should seek funding early due to their capital-intensive nature 6. He emphasizes the importance of understanding the type of business and its specific needs when considering funding options 6. Chris Saad adds that knowing the business and the founder's intent can help dictate the need for capital and the timing of seeking it 7.

Knowing the business you're in, as well as your intent, can help dictate whether you need capital or not and when you need the capital.

--- Chris Saad

Founders should carefully evaluate their stage and business model to make informed funding decisions.