Someone raised a good question when I presented to a group of new companies at 500 Startups recently:
“Are you worried that no one will invest in you now?”
My kneejerk, snarky answer would have been something along the lines of, “Nope! And guess what? I don’t care.” But that’s not what I said. I’ll paraphrase my reply:
You’re right, I probably am damaged goods now.
I say that not only because my investors lost their money on my last venture, but because I’ve been pretty forward about my feelings about venture capital in general, that it’s often not aligned with the interests of founders. My VCs didn’t want my last venture to be a small success. It needed to be a huge exit or it needed to die. And so it died.
However, you guys don’t need a multi-hundred million dollar exit to make your personal income statement pop. If you’ve raised a few million dollars then even a $10M exit will get you a house or at least a down payment on one, even after all the investors get paid (and they will get paid before you do.)
A million bucks in your bank account is a life-changing event for you but your VC investors would call it a failure. They would compel you not to sell. That dichotomy is a real problem unless you also would shrug off anything less than a monster exit. So before you take VC money, be honest with yourself about how you define success.
The best way for me to redeem myself is to build another great company. If I can’t raise money for it then I’ll have to do it without funding. I’m already doing that.
However, given where my mind is at today, I think if my bootstrapped business needed to become a big company, I’d sell it before I fundraised for it.
Remember this: if you can fundraise, you can sell. If you can sell for a multiple of what you took fundraised (or ideally you just bootstrap), then you can change your life.
But don’t take my word for it. Here’s a quote from John Mackey, the now-even-more-rich co-founder of Whole Foods (in case you missed it, he sold to Amazon for $13.7 billion), in his How I Built This interview.
…We turned to venture capitalists, who I have learned are like hitchhikers with credit cards. They get in your car, and as long as you take them where they want to go, they will help pay for the gas. But if you get lost or wander off the road you promised you were going down, they will hijack the car, throw you out and bring in a new driver.
My advice: be selfish. Take whatever exit that will change your life. And as for the VCs, let them eat cake.