Startup Funding Espresso – The Downside of VC Funding

The Downside of VC Funding

Hello, this is Hall T. Martin with the Startup Funding Espresso -- your daily shot of startup funding and investing.

Venture capital can enable a startup to reach the next level through funding.

There are downsides to VC funding.

Here's a list:

The founders' ownership goes down by 20-25% on each fundraising round.

The VC model promotes growth over all other strategies.

Taking VC money means taking the VC's business model, which is to give the Limited Partner a return in 3 to 7 years.

VCs will want the founders to take a minimal salary so as to apply as much capital as possible to growing the business.

The VC is concerned primarily with paying back the Limited Partners in their fund.

This means the VC is less likely to support initiatives that are impact-related or others that are important to the founder.

Some VCs provide funding but little else, such as coaching or a network.

The VC will bring their view of how to grow the business, which may not align with the founder's vision.

VCs take board seats, which come with a certain level of control.

For some startups, angel money may be a better option.

Consider these points before taking VC funding. 

 

Thank you for joining us for the Startup Funding Espresso where we help startups and investors connect for funding.

Let's go startup something today.

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