The Startup Podcast Top 7 Mistakes Founders Make in Raising Early Stage VC w/ Amir Shevat (Edu)
Why Raising VC Isn't Always the Right Move for Your Startup
Not every startup should raise venture capital; about 15% of startups that founders try to fundraise for do not need VC money.
VC funding is designed for building "rocket ships" — startups with big visions, high risk, and the need for massive capital to prove technology or business models. If your business plan is modest, like aiming for $5 million in revenue, then VC funding may actually be the wrong fit.
Founders must honestly assess if they want to "go to space" with their startup, meaning build a large-scale venture that reaches 100 million users or generates $100 million in annual revenue.
VCs expect substantial risk and returns, often needing 100x return on investments, so if your startup isn't prepared for that scale and pace, it’s better to choose other funding options or bootstrap.
Amir Shevat illustrates this by comparing startups to rocket ships needing rocket fuel (VC), and warns against putting that fuel in a "Toyota," i.e., a small business not designed to scale to unicorn status.
Not All Startups Need VC
- Not all startups need to raise venture capital (VC); some can be profitable businesses without VC funding.
- VC funding suits high-risk, high-growth startups aiming to scale massively, not smaller profitable businesses.
Avoid Cap Table Chaos
- Avoid cap table chaos like party rounds with too many small investors.
- Keep founders' equity healthy; under 60% founder ownership scares future investors.