To VC or Not to VC

By Deane Barker on June 27, 2003

Joel on Software – Fixing Venture Capital: Here’s a good article about why your company should or shouldn’t seek VC money. It’s long, but it gets very good down below the graphs — the bit about the four curves getting out of whack makes a lot of sense.

“VCs do not have goals that are aligned with the goals of the company founders. This creates a built-in source of stress in the relationship. Specifically, founders would prefer reasonable success with high probability, while VCs are looking for fantastic hit-it-out-of-the-ballpark success with low probability.”

I found this from an article at VentureBlog where they respond:

“It turns out that Fog Creek Software doesn’t want venture capital. Good! We often turn away businesses like Joel’s because they often don’t really need venture money. If a company is on a steady organic growth track, can finance product development out of revenues, isn’t involved in a highly competitive market where the first mover can achieve significant lock-in, and doesn’t have a high-risk, high-return profile, it has no need for venture financing.”

Incidentally, read the first comment here.