What I Wish Someone Had Told Me About Venture Capitalists
As a serial entrepreneur building venture-style tech companies, I spent the first decade of my career fetishizing venture capital. I’d follow VCs on Twitter like they were celebrities, I’d attend conferences if well-known VCs were speaking, and I’d brag to my fellow founders about pitch meetings at Andreessen and Sequoia and Benchmark. Despite not raising money from any of those firms, I’d naively assumed the simple act of taking a meeting with me was a form of validation for my company.
What I didn’t realize was that I was completely misunderstanding the purpose of venture capital. For a long time, that misunderstanding contributed to my inability to raise capital.
I’m sure I’m not the first or only entrepreneur to misjudge the relationship between venture capital and startups. In a way, new tech entrepreneurs are encouraged to worship at the altar of VC rather than understand it. The confusion starts with the tech press, where funding announcements dominate the headlines as “newsworthy” events. It carries into popular culture, where companies are described by their valuations (i.e. “billion-dollar unicorns”) rather than their impact (i.e. “saved the lives of 10,000 children”). It permeates conferences and events, where the featured speakers are often venture capitalists or entrepreneurs who have successfully raised lots of money from them. And it dominates the life cycles of startups as founders align their strategies to what investors want to see rather than what their customers will most value.
My goal, in this article, is to explain venture capital and venture capitalists in a way I wish someone had explained them to me when I first started building venture-backed tech companies. By doing so, I hope I can help new entrepreneurs understand A) how to engage with venture capitalists; and B) whether they should be pursuing venture capital funding in the first place.
Why venture capital exists
From an entrepreneur’s perspective, it’s tempting to think of the venture capital industry as being in the service of startups. After all, VCs fund startups and support their growth. Seems like they’re trying to help startup founders succeed, right? But assuming that the goal of VCs is to support startups confuses the purpose of venture…