SIGNEDIN BLOODTHEPITFALLSOFVENTURECAPITAL MARK JUVILER

MARKJUVILER .NET

VENTURE CAPITAL IS IN MANYWAYS A GODSEND .

It allows young companies totake their ideas from projectto product, dream to reality.Especially with the growth ofventure capital raisingplatforms like AngelList andaccelerators, which make iteven easier for individualsand companies to findmoney-wielding donors.

And lest we forget,there’s also SharkTank.

ALTHOUGH VENTURE CAPITAL CAN BE USEFUL(AND IN SOME CASES DOWNRIGHT ESSENTIAL)

FOR LIFTING A COMPANY OFF THE GROUND,

YOU WILL GET YOUR FUNDING ,BUT FOR A PRICE .

IN MANY CASES IT CAN ALSO BE TANTAMOUNT

TO SIGNING A FAUSTIAN BLOOD-PACT:

HERE ARE THREE REASONS WHY ANY ENTREPRENEURSHOULD THINK TWICE BEFORE TAKING VC MONEY.

1 ) RAPID GROWTH , RAPIDDEATH (OR THE CANDLE THATBURNS TWICE AS BRIGHTLY . . . )

Congratulations you havea lot of money! Now youjust have to make surethat you plan how to usethat money strategically,otherwise you’ll end upriding a crazy roller-coaster to the startupgraveyard.

In 2015, Quirky, Secret, and Zirtualall joined the ranks of the startupsthat acquired the money, resultingin their demise. Be it additional staffor marketing efforts, once you shiftfrom a cash-lean model to a cash-flush model it becomes all too easyto misuse your extra funds.

Make no mistake: growth is good.Cash is good. But you need to make

sure you have the necessarycustomer adoption and a viable

business strategy if you are going toavoid having that money lead to

your downfall.

2 ) HOSTILE TAKEOVER (ORYOUR COMPANY IS NO LONGERYOUR COMPANY )With every offer you accept, you lose a little bit of yourcompany. This happens quite literally in that your equity isdiluted more and more, but also in a more overarching systemicway.

Although your goals might bealigned with your investors at the

onset, they may change your mindor you may change your mind, and

if you change your mind, thenthere’s suddenly another party

that you have to get permissionfrom.

There’s another voice in the room,and it’s a voice you have to listen tobecause they’ve got something you

want. Be it culture, equity, or evenmission, you no longer have the

autonomy you once had.

3 ) DEPENDENCE (OR COULD IHAVE MORE , SIR?)

Once you starttaking thosebattleship-sizedVC investments,you start tobecomedependent onreceiving them.

Small loans, crowdfunding, grants,and otherwise alternative lesspowerful (but also less binding)forms of building capital lookmeagre in comparison to that 1 Milthat Mr. Wonderful is offering you.

What’s more, even though a VCmight be offering you a big chunkof cash, they might make youdance for it.

Often VCs require companies to hit certain milestones prior tohitting more funds. While deadlines can be good (there’s nobetter motivation than having a fire lit underneath you), they

can also throw wrenches into your plans.

What happens if you don’t hit that milestone that you’ve beenstructuring your fiscal plan around? You’ll need to start

structuring alternate plans not only for the growth of yourcompany, but also based on whether or not you’ll be getting

your next fix of cash.

3 ) DEPENDENCE (OR COULD IHAVE MORE , SIR?)

Once you starttaking thosebattleship-sizedVC investments,you start tobecomedependent onreceiving them.

VC FUNDING CAN BE LUCRATIVE ,BUT IT CAN ALSO BETREACHEROUS .

In light of the risk, it’s worth considering what yourcompany can do without having to sign a blood pact.

Shutterstock, WooThemes, and Basecamp are allexamples of startups that have made it big without VC.

Plus just as it’s become easier to seek out VC funding,so has it become increasingly easy to find fundingelsewhere.

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