It's good for founders to be ambitious, but they shouldn't be reckless.— Joseph Flaherty (@josephflaherty) July 22, 2020
Some VCs will try to "foie gras" dollars into promising startups. They're happy to leave 19 "craters" in the ground for the chance to back one Stripe.
But each of those "craters" is someone's career!
Venture Capitalists are unnecessary for the most part and are extraordinarily destructive of startups. They try to get startups that should be working through their business model to perfect it to instead supersize their current model. This usually destroys the original new business and the lives of the founders and employees associated with it.
Private Equity investors are even worse than venture capitalists; instead of destroying fledgling businesses, they destroy great existing companies. Sears, Toys R Us, and a very long list of other companies have been destroyed by PE. Their core model destroys companies by using huge amounts of debt to buy a company, then stealing as much of it as they can in the form of bonuses and self dealing, then selling the broken bones that remain before anyone else realizes the business is dead.
Founders should avoid VC’s like the plague if they can. Founders think taking $1m in funding validates their concept, but only the market can validate your concept. Premature scale will feel good at first, then will destroy the founder and the employees who joined. The VC will happily move on, he only needs 1 in 50 of his investments to work. Your bombed out business and life doesn’t matter to him.
The best alternative to VC money is simply getting early customers to help fund you. Do services contracting for them and you will learn a ton about their needs and the problems your solution solves. You will iterate rapidly and bring your business to actually solve customer problems.
Beyond customer funding, look at SBA loans. Or bank loans.
Avoid credit cards if you don’t pay them off monthly. Your business probably won’t grow as fast as your debt will if you go this way.
I personally used a combination of using my own savings (dipped into about $10k before my net worth started going up) in combination with customer funding.