Don’t Get Distracted Raising Venture Capital

Written by Sean Murphy. Posted in 1 Idea Stage, skmurphy

It’s not a mistake to accept venture capital if your business merits and requires it for growth. Don’t get distracted seeking it until then.

“The seductive narrative of Silicon Valley stars a genius-hero who goes on a journey, overcomes myriad obstacles, has a flash of insight and is rewarded by wise and benevolent investors with Series A funding. This narrative is bullshit, but it’s everywhere.

Venture capital is not a rags to riches story. It’s the inspiring tale of redeploying resources from a lower- to a higher-performing asset class. There’s nothing wrong with that – I find it kind of magical – but let’s not pretend we’re doing something else. In particular, let’s not pretend that this is an engine for social justice. You need a separate corporate philanthropy branch for that.”

Rachel Chalmers “Five Reasons Not To Raise Venture Capital

Here are her five reasons

  1. You probably won’t get a fair hearing.
  2. Raising venture capital doesn’t make you a good person.
  3. Most companies won’t ever generate venture outcomes.
  4. When you raise venture, you narrow your options.
  5. Venture math is a harsh mistress.

I think she misses the real top five:

  1. It’s not saying no to a real term sheet that is a mistake, it’s wasting time seeking investment instead of learning about the market.
  2. Writing a business plan or business model canvas is not nearly as useful as writing your customer interview questions or a one page sales pitch. Getting feedback on either  from customers will tell you more than feedback from a VC on a business plan.
  3. Asking prospect for money for an MVP tells you much much more about the market than any feedback from a VC.
  4. What can sound like advice on direction from a VC is actually a no. For example:  “this is interesting but we think addressing problem X or Market Y is more promising, think about it and come back and talk to us again.”)
  5. If you think money will solve your problems, you don’t have a good handle on your problems.

Affluenza victims, regardless of their socioeconomic level, falsely believe that money can solve all their problems.
Jon Winokur

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