Re:Don't Take VC Funding – It Will Destroy Your Company
by sfink on Sunday July 09, 2023 @02:47PM
(#36657579)
Good point.
> VC makes sense if you can grow fast and very large.
I could also argue that such companies are often a blight on the ecosystem. They're an invasive weed that outcompetes a rich variety of smaller companies, sucking the resources required to sustain such companies without doing nearly as much to enrich the environment. And then they tend to die off (perhaps through acquisition and having their product cancelled/absorbed into the larger company's), leaving customers high and dry. If they hadn't been there, some of the smaller companies would have still been around.
Answer: typically, you’ll walk away with $5m (25%) or less. VC funds usually have a 1x preference, which means the get their $10m back (plus interest), and THEN they split the remaining proceeds with you 50-50%.
So if you take VC money, you might have to double your valuation just to keep your take-home value the same.
VC makes sense if you can grow fast and very large. But assuming you have scenarios to grow slower or to a smaller size, those scenarios often turn into bad ones if you’ve taken VC funding.