Don't hate the player. Love the Startup-VC Game
Even better, have love for the game.
"Founder with 3x exits", "Raised a massive $$ for our Series Z round" 💰💰💰 and many more catchy titles and sound bites on tech media and LinkedIn posts. How about the final cap table? Who actually got those proceeds? This matter is too serious for smoke and mirrors. How can you peek behind the curtain?
As always, its best to start with end in mind. See if you are cut for this game. Do you even want to be in these fast paced 12-24 months growth-at-all-costs lifecycles?
The actual success rate is much lower than 10%.
It is a well-known fact that 90% percent of the startups fail. But let me paint an even gloomier picture. What happens to the remaining 10%? I'm sure you have been reading many cool articles about this X startup raised $$$ amounts and killing it. Or let me give you one better. Seeing titles such as "Serial Entrepreneur with 12371283 exits" :D.
It is a well-known fact that 90% percent of the startups fail. But let me paint an even gloomier picture.
Did you ever get a chance to glimpse into their cap tables? Do you know what the payout was. In what terms and conditions, the founder, team achieved their exit?
After having heard many heart wrenching stories from other "successful founders" in confidence, I can assure you that the real success rate is much lower than 1% from founders' point of view.
Avoid J Krause type VCs claiming your success.
If any of you have watched the ESPN's last dance documentary on all mighty Chicago Bulls, then you know the collapse was their own doing. And this happened to most dominant dynasty in the recent history of the game, led by the greatest player ever stepped on the court. They just finished their second three-peat in 8 years and could have won more championships.
Why I mention this? Your success might be your own undoing if you don't know how VCs and the game operates (P.S. I have tons of love for this game). As mentioned in Part I, an average startup-VC relationship lasts longer than an average marriage. If you don't plan it right, the way you set your cap table & board might doom your potential Cinderella story.
Success has many fathers; failure is an orphan.
An average VC sees 100s of more deals than a first-time founder/team. Knowing the odds, from the eyes of investors your startup is default "dead on arrival". Your job is to prove them wrong. Show in next 12-24 months that your venture is default alive.
Are you in the right level of readiness to do this sprint? Do you know how well you can deploy the funds that are given to you (I made this mistake). Do you know your clear milestone to hit to raise the next round? More importantly, do you want to have this sprint + marathon lifestyle for a foreseeable future and maybe a decade to come? (Not all of us are risk addicted type like Elon Musk).
End of Part
Coming Next
Who are LPs?
Why VCs need to return 3X but you have to 30X?
Why you would not receive all investments in one go and have 12-24 months to earn your follow on (or die)?
Bonus Stuff
Join us at Fundraising Success Group on LinkedIn where we share more in-depth insights and real startup examples.
