How You Finance Your Growth Determines Your Future
In today’s world, where it seemingly has become cool to finance your startup through Venture Capital, and many entrepreneurs do not even seem to consider alternative funding sources or merely different ways of building a company, it feels prudent to heed an important warning:
The way you finance your growth will determine your future.
The moment you have an equity holder in your company, your company will change; particularly the moment that equity holder gains enough shares to control your board — which can happen as early as a Series A or B latest. What might have been a company being build for the long-term, can quickly turn into a short-term and exit optimized one. Where before you could focus your attention on building the fundamentals of your business, you suddenly might focus solely on growth (as growth becomes the dominate determinator of your valuation — and an ever increasing valuation can quickly become the new name of the game).
Mozilla’s former CEO (and my boss) and now a partner at legendary VC firm Greylock John Lilly told Singularity University’s Global Solutions Program class of 2015 that he fundamentally believes that VC funding is not the right form of capital for 90% of the startups in the room.
Moreover, take it from Panera Bread’s CEO Ron Shaich, who told the participants at the Conscious Capital CEO Summit this year that he believes “control is more important than growth.”
Be very clear what kind of company you want to build. Explore all options as to the way you create, run and finance this company of yours. Moreover, don’t just blindly follow the siren call of venture capital just because it is what the “cool kids” do.