Keep that in mind when you fundraise

VCs are not always on your side

Last week, there was much debate in tech about an article from the NY Times. It was about a movement of not taking money from VCs because of the pressure on valuation and growth. It’s a valid point – not sure if I would call it a movement at this point but alas.

It did remind me of something else which I tell people who are fundraising for their company. It’s a word of caution specifically for people fundraising the first time.

VCs invest in your company. They expect a handsome return. Their interests are aligned to that sole goal.

People like to talk about how well they connected with a partner of a VC firm, but ultimately it’s not about you. Of course, in early-stage companies the company is you. But as the company grows that’s no longer the case. You’re the founder and often a C-level executive, but you’re not irreplaceable. If your company is doing well, they’ll keep you on. Otherwise, they don’t hesitate to push you out of your position.

When push comes to shove, they’re not your friend. They’re the friend of the company. They want the company to succeed. As long as you’re 100% part of the success, they’re your friend too. Over time that dynamic changes.

Is that a bad thing? No, it’s not. It’s healthy and what supposed to happen. They’re investors in your company and expect a return. VCs raise their funds from LPs who expect a return on their investment. It’s the cycle of venture funding.

But it’s good to realize they do not always have your back. They’re not your friend. Keep that in mind when you fundraise.

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