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Venture capital is a hell of a drug

Eric Paley
Founder Collective
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Venture capital increases risk for founders.

  • VCs will trade a higher probability exit for an improbable shot at a high dollar outcome. This limits your exit options.
  • You increase burn to dangerous levels.
  • Every dollar spent is a dollar of dilution.
    • Rule of thumb → startups should be able to triple their post-money valuation in two years.
  • Venture capital as a power tool: use it correctly to solve real problems; use it incorrectly and chop off your hands.
  • VCs require billion dollar exits to make their economics work. A VC has multiple shots on goal, a founder has one.
  • Don't focus on exit value, focus on your ownership in relation to the exit. You can often make more money at a lower exit value.
  • Focus on building a $10M business first and grow from there. Prove product market fit and scale responsibly Irrationally raising money to scale something that doesn’t work doesn't result in building a big business.
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