The tradeoff Startup founders must never forget

Them:

So, we’ve just nailed our MVP and we are getting some real traction.  Next we’re going to raise capital, get some funding. We’ll probably go to the Valley as it’s easier to raise there. The valuations are more generous. We’re super pumped, finally getting our startup off the ground.

Me:

I thought you were an entrepreneur? 

Them:

What are you talking about? Of course I am – didn’t you hear what I just said?

Me:

Yes, but here is what I heard….  That you’ve finally got something people want, you’re probably solving a real problem and you’re on your path creating value for others, and eventually yourself. But in this process, you’ve got caught up in pop culture. You’ve forgotten that a big part entrepreneurship is independence – creating your own path. So, you’re off to raise money and get caught up in someone else’s objective – that of the venture capitalist. The same group of people who’d rather see you fail trying to build a billion dollar company,  than help you build a $10 million company. Their business model you see, is based on the former, not the latter. 

Venture Capital - the downside

If there is anything startup founders should remember it is why it’s worth doing at all. Startups are hard, and rarely a path to riches. Entrepreneurship is more about exploration and freedom than money. If you want to be rich, there’s more chance of that happening being an employee of a company that already has a billion dollar valuation.

In both cases: a funded startup or being employee – you’ll compromise control. In that case you may as well have the certainty of money that goes with stock options and employment. If you want to be answerable to anyone other than your customers that is.

It’s a rare event indeed when the deal terms favour the founder. Real entrepreneurs find ways to make money independently with that anti-modern thing called a profit. For every example of an entrepreneur succeeding with funding, there are 99+ that do not. It’s a bet I’d never take unless the VC came knocking on my door and / or I could maintain total control and independence.

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