There is nothing in the VC model that says you have to run your business like an idiot if you take VC money... You can still run your business lean and keep your dignity. However, if you take VC money you need to realize that the VC wants liquidity and a ROI in ~7 years. So, if you want to run a small business that brings in ~$2M a year, don't go try raise a huge VC round at a high valuation. That probably would not work out well for either party.
> So, if you want to run a small business that brings in ~$2M a year, don't go try raise a huge VC round at a high valuation. That probably would not work out well for either party.
I'm curious, how would that negatively impact the founder?
If the founder still has a controlling interest what leverage do the VCs have to tell him that $2m/year in profit is not enough and to make him risk it for more?
If you can retain board control there isn't a ton of leverage unless the VC wants to hurt your business out of spite... in which case you picked the wrong partner.
What the VC can do is ignore you, in which case why did you take VC money when you intended to pass up the networking opportunities? What if you change your mind about raising another round of funding in three years but you already burned the bridge?
You should also remember that your cofounders will be on the board. Often the VC only needs to convince one of them you need a change in direction. A lifelong friend as cofounder will stab you in the back without a second thought if they smell a billion dollars at stake. Hence the advice to be careful about who you get into business with.
Or just don't take VC money in the first place. Then: Networking doesn't come with strings attached (or money), you have zero incentive to grow too fast, and there's no reason that you MUST make 2 billion dollars or shut down the business.
Seriously I've lost count of how many useful services have shut down because they couldn't eat the world, because just making really good money but not incredible ALL THE MONEY wasn't good enough. And for what? Some time in the public eye and a ton of money to blow on dumb shit like San Francisco offices that reduce productivity and a metric assload of hardware you didn't need in the first place.
It cuts both ways though. I am sure there are even more useful services out there that you never heard of because they didn't have enough money to market or distribute their product. The VC route and bootstrapping each have their advantages/disadvantages.
If you take money at a high valuation, the VC will only be happy if you try to grow the company significantly and exit at some multiple of that valuation. If the founder decides not to do that, then one of the largest shareholders in the company (the VC) will be angry. At a minimum I imagine the founder would be negatively impacted by losing some of his/her reputation in the investing space and having angst knowing that he/she took a VCs money and then ignored the VCs interests. At worst, there could be issues at the board level and loss of control of the company.
