To VC or not to VC?
‘When you have outside investors the focus naturally and rightly shifts to growing the business in a way and at a pace that suits the VC [venture capitalist’s] model. You are never really your own boss, the business and the needs of investors become the key priority.’ Charlotte Semler-West, serial entrepreneur and founder of Charlotte & Co.
The question that comes to mind is: when working capital is needed, does one approach a venture capitalist or an angel investor?
Perhaps the answer lies in the questions: how much advice and hand-holding do you need? How fast do you want to grow? How much independence do you want? What do you gain, and what must you give up?
There are many entrepreneurs who believe it is preferable to grow a business slowly; to use as little investment as possible. They believe that rapid growth is unsustainable and that it adversely affects both the viability of the business and the well-being of the entrepreneur. They are against investment from VCs and express the opinion that, “VCs have profited enormously by backing businesses. Meanwhile, the actual businesses that the VCs backed – and profited from – have often been loss-making.”
There is often a trade-off between profit and growth. Put simply: the faster your business is growing the less money it’s likely to be making. Of course it’s not true of all businesses – but for most, growing means acquiring new customers and developing new products – both of which are generally loss-making in the short term. To add to this risk, there is the stress of having the VC ‘watching your every move’.
Patently this is a one-sided view – many VCs have exemplary track records of facilitating the growth of business.
Is an Angel Investor the better option though? Certainly no interference…and growth at your own pace, at a sustainable rate that facilitates dynamic, innovative, slow growth…plus a balanced and fulfilled life.
What was your funding choice at start-up? VC or Angel? Would you go that route again as you grow your business?