Four Secret Benefits of Raising Venture Capital That No One Tells You About
The vast majority of products and services you use today were made possible because of investments from people called venture capitalists.
Venture capital is a financing strategy to scale one’s business and ultimately reach the finish line before your competitors do. In the tech startup world, the finish line is synonymous with a liquidation event, meaning a sale or IPO. To give you a sense of just how popular this means of growth is, here’s a very small sample of companies you likely know that have all used venture capital to win.
- Airbnb
- Amazon
- Apple
- Credit Karma
- DoorDash
- Dropbox
- Groupon
- Instacart
- LegalZoom
- Lyft
- Microsoft
- Nextdoor
- Netflix
- Postmates
- Quora
- Slack
- Snapchat
- Spotify
- Squarespace
- Stripe
- Uber
- Warby Parker
- WeWork
- ZocDoc
Raising venture capital gives you an unfair advantage over your competition.
Most people understand the benefit of raising venture capital as providing your business with money it didn’t otherwise have, so that you can achieve things you otherwise couldn’t. That’s true, but there is SO MUCH MORE to it than just that. What most people don’t realize is that raising venture capital also provides many founders with a network and notoriety they wouldn’t otherwise have. And why is this important? Because it takes way more than just capital to make a business successful.
It takes the right decisions being made, the right doors being opened, and the right type of attention being given to the company. The venture capitalists that a founder decides to partner with can truly be instrumental in helping the company succeed. This is especially relevant when a company is still in its infancy trying to get its footing and secure product market fit.
Here are 4 secret benefits of raising venture capital that no one tells you about:
1) Venture capitalists can open doors you thought were locked
Once you become a venture-backed startup founder, you now have relationships with powerful people who have powerful networks. Trying to get your product into Target? There may be an investor on your cap table who has a connection. Need to hire a new CFO? There’s likely an investor in your round who knows some great candidates. Looking for an executive coach? Your investors definitely know some good ones.
When you take in venture capital, you are essentially adding to your personal rolodex high caliber contacts that can help you accomplish your goals. And why would your investors open up their private network to you? Because your motivations are aligned. You want to win, and they want you to win, so that they can make money off of your win. Welcome to the world of investing.
2) Venture capitalists can coach you on how to win the game
These powerful investors and the powerful people in their networks are successful for a reason. They know certain things and people that you don’t yet. Have you raised hundreds of millions of dollars before? Have you scaled a company from zero to tens of thousands of employees before? Have you successfully fended off competitors en route to the finish line? Likely not. But guess who has? Your investors and/or the people in their networks, and oftentimes, they will coach you on how to follow in their successful footsteps.
3) Venture capitalists give you a larger platform and brand
In the venture capital world, a portfolio is comprised of a set of companies that a single investor and/or investment firm has invested in. The quality of an investor’s portfolio is how they are ultimately judged. When you — the founder — raises venture capital, you become a part of an investor’s portfolio. If the investor’s portfolio includes successful companies, then by association, you get to benefit from the brand equity already established at the firm. For example, telling other people that you’re in the same portfolio as Airbnb, Glossier, Pinterest, Rent the Runway, or Slack definitely makes future investors, the press, and prospective hires perk up and pay attention.
4) Venture capitalists introduce you to more venture capitalists
The thing you have to realize as a founder who is raising venture capital is that once you raise a pre-seed round, you are expected to raise a seed round. Once you raise a seed round, you’re expected to raise a series A round. Once you raise a series A round, you’re expected to raise a series B round. On and on it goes until you reach the finish line. And you remember what the finish line is, right? A liquidity event (i.e. a sale or IPO). So the question becomes: How in the world are you going to find that many investors who will want to continue investing in your company’s growth? The answer is simple: the investors you already have!
The investors you already have are the gatekeepers to the next set of investors you need to get to. Investors at different venture capital firms know each other, consult with each other, and ultimately benefit from doing deals together. It’s in your investor’s best interest to get other investors excited about your company. You can think of it this way: your current investors are like a built-in recruitment firm to help you access new investors. Not a bad perk, eh?
In Conclusion
Raising venture capital can help you get to the finish line faster than you otherwise could. It’s one tool in the startup toolbox that you can use. I hope this article has pulled back the curtain for you and shed some light on the secret perks of this game that most people never talk about. Venture capital truly is one of the ultimate competitive advantages, and the more people that know how to use it — especially those who have historically been left out of the industry — the more inclusive companies, products and services we will see.
Founder Gym can teach you how to raise venture capital.
Founder Gym is the leading online program that trains underrepresented founders on how to raise money to scale their tech startups.
(updated December 2020)
The inaugural FG Fundraising Cohort debuted in January 2018, and since then, 485 founders spanning 24 countries and 6 continents have graduated and gone on to raise over $78 million in startup capital. FG Graduates reside in Australia, Canada, Cayman Islands, Colombia, Denmark, Egypt, England, Estonia, France, Ghana, Ireland, Jamaica, Jordan, Kenya, Lebanon, Mexico, Nigeria, The Philippines, Palestinian Territories, Singapore, Spain, Switzerland, United Arab Emirates, and the United States.
All FG Cohorts are 100% virtual, so you can participate from anywhere in the world.
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