Comments on: VC to aspiring entrepreneur: Are you sure you want our money?

By: Dr Frank Morgan

Dr Frank Morgan — Thu, 21 Aug 2008 09:42:27 +0000

I am a private investor based in UK . I focus on seed capital, early-stage
,start-up, ventures, LLC and all round for completion and expansion of
investment projects that need funding. I am interested to invest in your
company for a long-term business relationship. If this is alright with you
kindly get back to me with more details about your company. Thank you.
Dr.Frank Morgan,
(Individual/Angel investor)
Tel: +447031901860
Email: info_investment3@yahoo.co.uk

By: Venture Midwest » Stay Private and Avoid Venture Capital

Venture Midwest » Stay Private and Avoid Venture Capital — Fri, 19 Jan 2007 20:02:36 +0000

[...] Bonjour les Lecteurs. The following advice is courtesy of Sarbanes Oxley Act (SOX): Remain a private company and avoid venture capital funding. Jim Clark’s departure from the board of Shutterfly is the latest SOX related casualty in the venture capital industry. According to interviews with Clark post departure, SOX provides no benefits to the venture capital community. Existing large corporations are protected from accountanting and investor scandals, but SOX is debilitating for strapped start-ups: “If it did anything for you it would be O.K., but I’ve seen absolutely nothing except at least a doubling of the legal and audit bills. It’s very bad for small companies. The current notion of exempting smaller companies from Sarbanes-Oxley is stupid. Every small company wants to be a big company. It’s a continuum [so they’ll have to comply anyway]. It needs to just be flushed down the drain.” How can companies avoid the confinements of SOX? Remain private and small. Don’t dream of large revenues and global domination. Basically, operating with a complacent mentality unimaginable to entrepreneurs. Venture Capitalist and Venture Beat contributor Charles Moldow, however, offered some conflicting advice to entrepreneurs seeking capital, warning against venture funding in certain situations. Using the analogy “not many mice ever grow up to be antelopes,” Moldow infers that while every small company wants to be a big company, not every idea is venture worthy. A large investment for a company with miniscule pre-funding valuation is nonsensical, decreasing financial return for both entrepreneurs and venture capitalists. The Sox Strain is everywhere… [...]

By: Pran Kurup

Pran Kurup — Wed, 17 Jan 2007 23:44:27 +0000

A refreshing change from the usual self-serving stuff from VCs.

Youtube became a great investment most likely because of the VCs and their connections. Money from a good VC has its advantages for sure.

Check out this article on the Odeo story.

http://gigaom.com/2006/09/14/evan-williams-how-odeo-screwed-up/

By: Buzzed about Venture Capital « Venture Wrap

Buzzed about Venture Capital « Venture Wrap — Wed, 17 Jan 2007 21:21:33 +0000

[...] Charles Moldow, a General Partner at Foundation Capital, has written a great piece of advice for entrpreneurs considering their route to market titled VC to aspiring entrepreneur: Are you sure you want out money? in which he outlines the equity dilution principle vis a vis exit opportunities and urges would be investees to think hard about the path they choose. [...]

By: Buzzed about Venture Capital « Yoick - Hightechwire

Buzzed about Venture Capital « Yoick - Hightechwire — Wed, 17 Jan 2007 19:49:00 +0000

By: Ash

Ash — Wed, 17 Jan 2007 17:41:54 +0000

A refreshingly honest perspective. Thx Charles.

By: Mike

Mike — Wed, 17 Jan 2007 16:31:09 +0000

This is a great article. When we started Cavenger, we considered taking VC money but decided to bootstrap it. It was definitely a good choice, because it allowed us to not give away a large portion of equity too early.

By: John Doe

John Doe — Wed, 17 Jan 2007 03:00:00 +0000

I think this kind of VC is ingoring the fact that hedge funds, corporations, and private equities are continueing to move in on the turf of VCs. On top of that, you have more active angel investors tool.

That is the reason why billion dollar CRV started giving out 250k loans with the option to match initial investments for a smaller piece of the pie.

If anything, it is more of a startups market and less of a natural VC market.

Times are changing ………..

By: Vaibhav Domkundwar - BetterLabs

Vaibhav Domkundwar - BetterLabs — Wed, 17 Jan 2007 01:59:36 +0000

Charles:

This is one of the best written note on this “very common” discussion today. Every startup we work with is precisely evaluating these alternatives.

I have one question, though. You say, “Not many mice ever grow up to become antelopes.”. Can you expand on this? Are you assuming mice are HotFeature.com-like companies OR are you assuming mice are companies that decide to bootstrap?

There are tons of HotFeature companies that are getting VC money and there are a lot of product plays where the entrepreneurs are deciding to bootstrap.

How to VCs/entreprenuers decide if a particular company is a feature or a product? YouTube could VERY WELL have been a “feature” of Yahoo, MSN and AOL portals. Its just another content format, right? I think most smart entrenprenuers can argue that, what a VC considered a feature is actually a product. No one knows the real answer until it takes off. If it takes off, most admire it as a product. If it does not, everyone brushes it off as just another feature.

Thoughts?

By: Sramana Mitra on Strategy » Blog Archive » Don’t Take Venture Money

Wed, 17 Jan 2007 00:57:22 +0000

[...] Charles Moldow of Foundation Capital writes a good piece on when and why entrepreneurs should not look for Venture money. [...]

By: Sramana Mitra

Sramana Mitra — Wed, 17 Jan 2007 00:51:37 +0000

There is a glut of good small business opportunities out there right now, especially because the Internet makes it ever so easy to market, generate traffic, etc.

I want to also point out that entrepreneurs ought to consider not taking ANY outside money at all, which leaves them an option of running a cash business for years, without being forced to have an exit. The moment, however, they decide to take any outside money, they have to exit, and that’s not necessarily always desirable.

By: Texas Startup Blog: Web 2.0 and Social Media » Blog Archive » Are you sure you want to raise money?

Tue, 16 Jan 2007 23:50:15 +0000

[...] More and more entrepreneurs have been telling me they are going to bootstrap instead of trying to raise venture capital. Charles Moldow has an article titled, "VC to Aspiring Entrepreneur: Are You Sure You Want our Money?" He explains a situation that is all to familar: HotFeature.com has 10 employees and the founders each own 35% of the company. They pitch me on the idea and I agree with their assessment that consumers want and need HotFeature.com. They have raised $1.5M in angel money to date and have given up 20% of the company to investors. They require another $10M to grow their audience and build brand. [...]

By: Perry Mizota

Perry Mizota — Tue, 16 Jan 2007 21:56:42 +0000

I couldn’t agree more. It’s refreshing to hear this perspective from a VC.

By: Chris Jeffers

Chris Jeffers — Tue, 16 Jan 2007 21:40:02 +0000

Deja Vu.

This was forwarded to me after coffee this morning by an exceptionally successful entrepreneur during an uncannily similar dialog.

This could have been written about us.

Our space is hot… Technology and IP have business value… We even have clients and growing revenues… So now the VC calls are coming in. Junior partners extolling us to consider what they can bring to the table, and take some money….

We don’t want just money (’cause that costs too much)

There’s no question additional funding can enable us to accelerate selling and marketing (the tools we need to drive company value.)

But equally (more) important, is the business acumen and resources an external “partner” can bring to the table. It’s not really about valuation surrender. Angel, syndicate, VC Firm? This is the challenge facing us. From who/how can we best collaberate to leverage the extraordinary opportunities ahead?