VC’s Are Destructive Predators

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.

https://www.bloomberg.com/news/articles/2019-07-24/private-equity-has-killed-600-000-u-s-retail-jobs-study-sayshttps://www.bloomberg.com/news/articles/2019-07-24/private-equity-has-killed-600-000-u-s-retail-jobs-study-says

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.

Published by

Joel Gross

Joel Gross is the CEO of Coalition Technologies.

2 thoughts on “VC’s Are Destructive Predators”

  1. Most people start startups to get rich, and VCs help them get there. Slow organic growth equates to way more work than working a regular job for the same money. Of course founders value the mission of the company for its own sake, but that has to be balanced against making money.

  2. Agree that by growing rapidly, there is often not enough time to pivot and adjust. But also believe that just as much damage is done if startups get no venture funding at all, because founders need to eat and need health insurance. And customer acquisition is the hardest part, and a penniless founder cannot capitalize on the opportunities as they present themselves.
    Lesson here is to run an analysis of your future growth plan, don’t just assume that a VC pumping money into your startup will make the difference.

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