Published on July 19th, 2013 | by Jose Vasquez1
When Venture Capital is a Bad Thing for Startup Tech Companies
Venture capital is an end goal for many entrepreneurs, but it isn’t always a blessing.
Many entrepreneurs of startup tech companies seek venture capital as a goal within the first five years of launching a company. Venture capital, from collective or single funders, can do wonders for accelerating a startup tech company and encouraging growth and expansion.
However, there are instances when venture capital funding can work against a company’s original business plan. An anonymous startup tech company founder recently started a blog called “My Startup Has 30 Days to Live,” in which this CEO details his/her experiences in the business world after receiving a significant sum of venture capital.
This anonymous entrepreneur claims his/her business was profitable, sustainable, and in a really good place until he/she accepted venture capital funding. After accepting VC capital, the company entered a massive downward spiral.
The blog details the stability of the original startup tech company, with a team of qualified, hard-working individuals and a steady, reliable stream of profits rolling in consistently. The company received an offer from a tech company accelerator, and jumped at the notion of getting venture capital.
From there, influencers began to take control of the company’s direction, compromising the business’s integrity and turning the model into areas that the entrepreneur never envisioned or desired. Gradually, the owner has had to make cuts to the business and now believes his/her startup tech company is doomed to failure because of the venture capitalists’ influence.
Does this mean that all venture capital is bad and you should try to grow your startup tech company organically? Certainly not. For many companies, venture capital is extremely beneficial, allowing expansion that might otherwise not be possible.
But before you start seeking venture capital funding in a blind rush or just because you think it’s what startup businesses are supposed to do, examine your current business model and evaluate whether the influence of venture capitalists is going to benefit you or possibly corrupt what is otherwise a stable, predictable model. If your business is making steady growth—keep with it.