How to decide "to VC or not to VC"?

Backstory: I've been working on a startup in stealth for the last couple months, with one product already live and two others in the works. I've been gaining traction organically during this time and I do have a direction in mind for the overall offering.

In the last couple weeks, I've got requests from multiple VC firms asking if I'd be interested in raising money, and while I wasn't planning to do it originally, now I'm thinking if I should if there's interest from VCs without me reaching out to them.

While I've previously built, grown and sold projects and companies, I've never really raised funds (never needed to I guess?) so this is new to me, and not sure how to even think about it.

How do I decide and what do I even consider for if I should raise funds?

  1. 3

    Before bringing on a VC, be sure that your interests are aligned. The VC's interest is a 10x (or more) on their investment, so they will always be focused on speed and quick returns. If your primary interest is also speed and quick cash, then you're good. However, if your primary interest is building something useful while running a "lifestyle" business, then your interests are not aligned and you should not pick up the phone.

    1. 1

      This is something I've had on my mind, but I'm unable to put it into comparable terms. Like, sure both of us want to make money, but I also want to make the product be something that stands out in the crowd, and I'm not sure how do I know if the VC is aligned on that. So far, all 3 VCs I've talked to have said "Love the direction, we want to support you in doing what you want to do" which honestly doesn't give me a lot to work with.

      1. 1

        Maybe consider talking with a few founders in their portfolio. That might give you an idea of their style, how they collaborate (or not), and what experience you might expect working with that particular VC.

        1. 1

          That's a really good idea, thank you!

  2. 2

    I've previously raised funds, and would not do it again.
    The main reasons are:

    • You loose control and have to report to someone
    • You have to burn cash... and this automatically gives your company a death date (which can be really stressful if your growth is not as fast as expected)

    Here's a more in depth article I wrote about this:

    I would only raise fund I really had to (Hardware or any capital intensive business, but not for a SaaS) and would also consider alternatives ways to raise funds : Republic, Fairmint, ...

    1. 1

      Can you explain what do you mean by "have to burn cash"?

      I understand the control part, and that's what I'm trying to avoid at the moment as well.

      1. 1

        This means that you will probably spend more money than you earn to fuel your growth, and therefor not be profitable for a while

        1. 1

          I understand what you mean by burning money, but I'm trying to understand if VCs try to force it on you. Like, do they force you to spend more money than you have/are making?

          For my projects so far, I've had a very methodical spending process and has worked flawlessly.

          1. 1

            They don't force you, but generally there is no point in raising capital if you spend only the cash you have.
            The question is : what would you do with the money ? Build your product ? Acquire more customers ?

            In my opinion, spending only the cash you have is a more healthy way to build a business.

  3. 1

    Also a point to add here @akshatmittal unless it's a partner from the firm reaching out, I wouldn't read too much into VCs reaching out to you cold. I get about 2-3 emails a week from VC analysts and bots for a startup I built and KILLED over 6 months ago lol.

    1. 1

      Haha, that's fair. It's not the partner who reached out, but rather someone right below them who sources potential deals for the board. I did take 3 calls, so I know it's not a bot at least.

      But I'd take your advice, unless the partner reaches out directly, I won't read too much into it.

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