As someone who has helped lead a successful funding round for a VC-backed startup, I have a pretty good idea of what it takes to get a venture capital firm to buy into your vision and cut you a check.
Yet for my current project, Epilocal , I decided that I didn’t even want to go down that path. In fact, I ruled out VC funding from the moment I started.
This is not to say that I have anything against venture capital. I think that VC funds fill a necessary role, but that role is very specific. VCs exist to find and fund the businesses that need capital in order to compete in a huge market.
In my case, I didn’t need any money to get started — I’m able to do all of the work in my business currently and I have built up a personal runway over the years that gives me the freedom to work for some time before getting significant sales. And I’m not trying to target a huge market — in fact, my market is pretty niche (local news sites and other small online publishers).
Once I removed the thought of VC funding from my mind, what I found is that it empowered me to think differently than the way most people think about startups. This is because the majority of information you will read on the internet about startups is geared towards your wannabe blitzscaling, world-dominating unicorns.
While there was very little information out there for people who are following a more gradual and modest path to building a business. What this means is that you will often find yourself breaking the so-called “rules” or the dogma that has been established over the years by the most influential and successful VCs.
Don’t get me wrong, their rules are still very valid if you’re trying to be the next Mark Zuckerberg.
But if you’re not, and I think the more people in the startup community should come to the realization that they’re not — then you don’t actually have to follow the rules. In fact, following their rules may take you on the exact opposite path of where you want to go.
Read on for some examples of rules I’ve personally broken and why you shouldn’t be afraid of breaking them too.
As a solo founder, I started off by breaking one of the cardinal VC rules that says you can’t build a successful startup on your own. Never mind the research that says solo-founded companies are twice as likely to become profitable as companies with multiple founders. No, what this rule really means is that VC firms will not fund startups with just one founder.
This is because VCs don’t just care about if you can get things done. Seeing multiple co-founders shows a VC that this person can sell their vision to other people and it gives the VC insurance in case one of the founders burns out.
One of the main things that VCs are looking for is a huge target market, usually at least $1 billion, that you can address through your startup. The reason for this is simple: VCs invest in multiple startups with the understanding that some of them will fail, some of them will not grow very much, and a couple will make it big.
Given the fact that VCs need to provide returns to their investors that are far better than the stock market to justify their worth, they need those few winners to make it very big. As a result, VC funds look for startups to invest in that can “ return their fund .”
One of my biggest pet peeves when it comes to the startup ecosystem is the number of startup coaches out there spouting the same recycled wisdom from Steve Blank or the Lean Startup about how you have to “ get out of the building “ and talk to X potential customers before you even start building your idea.
What frustrates me about this advice is that I’ve seen it deter lots of people from making any real progress on their ideas. Often they give up altogether because they think that since they can’t find enough people to interview, then entrepreneurship must not be for them.
As mentioned before, VCs are looking to fund companies that can capture huge markets. As a result, they’re not interested in building businesses that can comfortably sustain founders and employees.
If they can’t get an exit that contributes to their returns in a set period of time, then it is a failure. Period.
As a result, VCs would prefer for a startup to go bust early if it doesn’t have a chance to become a big winner. This way they can focus their attention on the startups that do have a chance of making them money.
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