What Startup Founders Might Consider Before Seeking VC

Venture Capital seeks opportunity, not a sales pitch.

The mindset to have is that you don’t want to have to seek VC, you want investors to seek you. Of course, that doesn’t mean you won’t have to do the work and start the conversation; it’s a mindset — what are you doing to build the kind of company they’ll want and find?

Some popular discussion sparked a checklist to consider…

Two notions are complete nonsense

1. You have to have revenue. No, you don’t. Read that perspective. Seek out advisors who understand how that isn’t the case if all you’re hearing is that it is.
2. You have to be a unicorn. Society’s fixation with unicorns is fascinating to watch. Venture Capitalists aren’t looking for the next billion dollar company; but they are seeking work that can achieve far greater value than the capital they invest.

What isn’t nonsense?

1. You must be capable of and willing to deliver a return on their investment. Venture Capital is not a loan and it’s not a business partnership; if that’s what you want, seek those sources of capital. Venture Capital is investment in innovative ventures that are more likely to deliver out-sized exits. If you aren’t willing to exit, or capable of doing so, don’t bother.

2. All capital comes at a cost!

Customers aren’t “better,” startups fail all the time that have customers and the cost of being wrong is expensive

Convertible notes aren’t “better,” the terms and obligations *can* be a problem

Bootstrapping isn’t “better,” it is a burden to do it yourself and you’d hate to lose to competitors better capitalized

Venture Capital isn’t better either! VCs take ownership and rightly expect to have a voice

3. Venture Capitalists generally alleviate their risk by focusing on your team.

Get to know them. I’m much more inclined to invest in you, knowing you, than I am because you have solid business metrics

You alone are NOT capable of being successful and competing; no matter how confident and capable you are. Have you filled your gaps and built a team that is?

4. Traction != Customers. That’s some annoying advice right there.

• Do you have co-founders?
• Do you have Advisors?
• Do you have Letters of Intent?
• Have you surveyed hundreds of people?
• Can you show me consistent traffic growth?

5. “Startup” means a venture in search of a business model. Meaning…

You will fail along the way, it’s expected

Your numbers will be wrong, it’s presumed

You will pivot; you’d better

You should not have to prove anything through customers. When you create value, customers will manifest. Peter Drucker, “businesses exist for only one reason: “to create a customer.” How? Here’s how.

“Because the purpose of business is to create a customer, the business enterprise has two–and only two–basic functions: marketing and innovation. Marketing and innovation produce results; all the rest are costs. Marketing is the distinguishing, unique function of the business.”