will raising venture sell my soul?
Q2.25 LP update excerpt
Trying out a short and sweet career advice column answering questions I get all the time :)
Dear Moth,
I founded a project I really care about a year or so ago and recently hit a bit of a juncture. I need money if I want to continue to work on it and hire people to help me begin the next stage, but I’m apprehensive about raising venture. I’ve seen too many of my founder friends become miserable after raising money — it seems to often take all the joy out of building for them. I like being a founder in the sense that I’m starting something from nothing and catalyzing change, but I don’t like the idea of being financially obligated to build a billion-dollar business. What if that’s not the right path for this project but I only realize that many years from now?
I want to work with my talented friends to make something excellent that helps others in some way. Is that mission compatible with venture? I keep hearing conflicting ideas on what it actually means to take money from investors. My main questions are: what would my investors expect from me? How will my life change? If the investor was a friend first, will this change our relationship? How will they feel if I don’t make them a lot of money? Basically, I’m wondering if raising venture will mean selling my soul. Any advice is greatly appreciated.
— Soul for Sale
Dear Soul for Sale,
It’s a good sign you’re thinking this way. If you weren’t, I’d have some hard news to break to you. But your trepidation could also be a sign that you aren’t ready. Venture is the right financial vehicle for visions that can’t really be actualized any other way — the kind of projects that demand speed and scale in order to survive. I’d first figure out why you’re hesitant about taking this leap. Is venture money actually necessary to get your project where you want it to go? Or do you feel that you need to become a founder? If so, that is generally a bad reason to start a company — exactly the kind that leads to your feeling like you sold a piece of your soul for a few million dollars that isn’t even really yours.
I see people cope with the responsibility that comes with raising venture capital in many ways. Some pretend they don’t care, while secretly feeling a nagging sense of dread about the responsibility they took on to their investors. Others decide to believe that all VC’s are stupid so there’s nothing wrong with wasting their money. While it’s true that venture capitalists have many consistent and exploitable failure modes as a result of investing lots of money with very little information, they’re rarely stupid nor disposable.
Venture cope is often a product of not choosing the right investors to partner with — resulting in an adversarial relationship that stems from your feeling neither trusted nor supported by your investor(s). Avoiding this looks like expectation alignment; asking potential investors how they work, what they want, and why they invest at all. Investors who are betting on your potential to make a great founder are generally less constrictive than those who invested on the belief that you would be exploiting a specific opportunity.
To answer your own question of whether you should raise, you must become really honest with yourself. What are you truly afraid of? Can you get more comfortable with that potentially happening? Are you willing to shapeshift yourself in order to be more marketable to venture capital? Does that feel worth it to do on behalf of this project?
— Moth
This was a really cool post, thank you for writing it!
I once completed an exercise that helped me start to capitalize a venture. In 2023, I was at a talk where Mysty Rusk explained the “Use of Funds” concept. The idea is to compare individual projects of a venture. I was to make a list of what I could do to make the venture become what I envisioned (eg hire a sales leader to scale salesperson activity and thus sales). The learning was in comparing each item in the list. By writing out the funds required and the change in evaluation I was able to estimate return on investment. Putting it in numbers kept me objective.
The exercise taught me the valuable skill of return on investment. Similarly, the questions asked in the last paragraph instigate the reader towards finding a risk. Answering the questions will make one aware of any shape shifting because the risk becomes clear. With this honesty, venture cope is manageable. What the exercise led me to is how important a 'joint venture' is.
With a joint venture there is a shared goal but more importantly a shared comfortability with a risk “potentially happening”. For example, hiring a sales leader increases chances the company is profitable. Hiring a sales leader may also end up meaning the company does not have the money for engineering and thus does not reach product led growth. With a joint venture each can be addressed.