Venture capital funding is to tech startups what the Wizard of Oz is to Dorothy — a longed-for solution to a central problem, imbued with a sense of power and even magic. Many startup founders see snagging VC funding as a major goal. But many end up finding that VCs are too often what Dorothy discovers the Wizard to be: a chimera — extremely difficult to access and possessed of some major drawbacks.
Here are six reasons that getting VC funding isn’t always the most constructive goal for your business.
1. VC is absurdly hard to get
2018 was a banner year for VC investment. But still, a tiny fraction of businesses actually receive that funding. A start-up founder who turns to a typical VC firm that funds 0.2% of applicants has a far better chance of getting into Harvard Business School than receiving a Seed Round.
2. Seeking VC is time-consuming
3. VC is expensive
4. VCs take a lot of control
5. VCs demand an exit
6. Uncertainty spooks VCs
VC funding is a great fit for a small number of businesses. For most, it isn’t a great fit and should probably not be a goal. Instead of chasing VC, you may be better off thinking about how you want your business to look, how you want it to grow, and how much ownership you want to maintain, then set your goals vis-à-vis fundraising based on those ideas. Alternate funding approaches like Lighter Capital’s “Capital-as-a-Service” are more likely to sustainably support SaaS startups.
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