Are you in the fundraising process and wondering what are the pros and cons of venture capital? Can there really be any downsides of raising large amounts of venture capital?
Landing big-name VCs and their tens of millions of dollars in funding for your startup is the holy grail for many entrepreneurs. There are clearly significant advantages of going this route. Yet, for every pro, there can be a con. What’s important is knowing what they are, and balancing that in your business.
Should you bootstrap? Self-fund? Stick with angel investors and friends and family? Or is VC money for you? Let’s find out…
The Pros Of Accepting Venture Capital Money
1. The Ability To Go Fast
One of the best benefits and reasons to go after venture capital is the ability to go fast. Timing is incredibly important as a startup.
If you are on the crest of the wave you need to make the most of it. Go too slow and there will be plenty of other better-funded giants trying to steal the space you created or soak up the market with similar technology and their position.
If speed is important, and it usually is, then raising VC money can be for you.
2. Buy Up The Market
When wondering about the pros and cons of venture capital one of the great tools that have enabled recent startups to get so big, so fast.
It’s even enabled them to go beyond disrupting markets to force new regulations and ways of doing things. Just look at Uber and Airbnb.
Having the capital means you can go broad and tackle multiple markets faster than the competition. It also means that at least temporarily you can afford to undercut everyone else with a loss leader. Just make sure you have a plan for closing this gap. One that doesn’t mean turning off all of the customers you’ve gained.
At this stage in your business, you may also buy up and acquire the competition and perhaps include that in your roadmap or business plan. Assimilate their talent and infrastructure and eliminate competitors. Build an even larger company by consolidating.
3. You Don’t Have To Die Right Before You Make It
The greatest risk of startup failure is normally right when things are really taking off. Your best month in orders can also be the most deadly in surviving financially. You have to have the capital to fill orders and provide an excellent user experience while waiting to get paid.
Having substantial capital in your accounts can ensure you can cover these gaps comfortably and enjoy your success.
4. Attract & Hire A Great Team
Always remember as part of the pros and cons of venture capital that winning in business is all about your team. The company with the best team wins. This can be a challenge for lean startups. You can have a hard time selling experienced startup talent to come work with you. You can struggle to make payroll.
In contrast, VC funded startups give the best talent the confidence that they can come on board and do their best work. You’ll be around long enough to complete the mission, and they can count on getting paid for their work.
See How I Can Help You With Your Fundraising Efforts
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