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😱 The Bulletin #18: Reasons Not to Take VC Funding and Handling Failures & Challenges
Good morning! 🌤 Things have picked up quite a bit but hold on just for five more weeks. Take a quick break from your p-set or essay and check out the Bulletin #18, all about failures & challenges and reasons not to take VC funding!
Why Start-Ups Don’t Take VC Funding 🧐
😤 YoU’Re NoT a leGIt STarT-Up iF yOU DoN’T HaVE vc FuNdiNG
Students think as soon as someone creates a venture, they need to fund, fund, fund. But taking VC funding can actually kill your startup and may be the opposite of what you’re looking for when strategizing growth. 🙈
Brown grad Becca Millstein of Fishwife has avoided VC funding thus far because she simply isn’t ready to grow the company at the rate a VC firm expects—she wants to have everything from supply chain to partnerships established and ready to go before launching off.
Venture capital has boomed over the last decade and the hype has created too many misconceptions and myths surrounding the investment style. Read them down here. 👇
🥴 An Unusually Candid VC Explains Why VC’s Can Be a Bad Idea
Eric Paley, managing partner at VC firm Founder Collective and co-founder of 3D dental impression company Brontes Technologies (acquired by 3M in 2006) “explains in detail why VC funding can be so bad for a startup that it's actually toxic.”
1. VC’s push startups to grow fast at all costs. VC’s will always pressure startups to scale but it can actually kill the business.
2. Small problems don't get fixed so they turn into big ones. When founders are focused on scaling, they don’t have time and think they’ll fix problems as they go—but that may be their greatest mistake.
3. Insisting on growth can mean sacrificing future profitability. VC funding can make it difficult to turn a profit, what Paley calls the “marginal dollar problem.”
4. They push founders to sacrifice a viable present for an improbable future. For example, you’re offered a $100 million buyout but your VC encourages you to turn it down to keep scaling.
5. A win for them isn't necessarily one for you. Paley says, “In fact, it's quite possible that you could sell your startup for $1 billion but wind up with less money in your pocket than someone who sold for $100 million.” That’s because with each round funded, your equity of the company is diluted.
Go in-depth here, it’s a fantastic read.
🤳 6 Myths About Venture Capital
Myth 1 - Venture Capital Is the Primary Source of Start-Up Funding: angel investors and crowdfunding are available 💸
Myth 2 - VC’s Take a Big Risk When They Invest in Your Start-Up: risk is spread across a VC’s portfolio to mitigate the likelihood of startup failure ‼️
Myth 3 - Most VC’s Offer Great Advice and Mentoring: you need to conduct your own due diligence as a founder!
Myth 4 - VC’s Generate Spectacular Returns: overall performance of the industry has been poor, VC funds haven’t outperformed public markets since the late 1990s.👩💻
Myth 5 - In VC, Bigger Is Better: “But industry and academic studies show that fund performance declines as fund size increases above $250 million.” 📑
Myth 6 - VC’s Are Innovators: While VCs have changed over time, “funds are structured, capital is raised, and partners are paid just as they were two decades ago.”⚡️
“Venture capital financing is the exception, not the norm, among start-ups.”
Read the article that dives into each specific here. 🌟
Startup@Brown x Women’s Empowerment Entrepreneurship Conference Recap 🦄
Did you get the chance to attend any of the speaker’s workshops and talks? If not, no worries—we got you covered with some highlights from the event, especially on failures and challenges. 💥
Those words are always mentioned whenever anyone breathes “entrepreneurship” and has become a blanket statement. Here are the stories of some of the greatest entrepreneurs and how the startup world isn’t as shiny as it seems. 🙊
🍱 Christina Qi, Founder of DataBento and hedge fund Domeyard, talked about failures
Christina Qi didn’t get a return offer for a finance firm her junior summer at MIT, she didn’t win a single pitch competition out of the hundreds she attended, judges shook their heads and scoffed at her pitches, her hedge fund Domeyard was turned away by lawyers because she appeared too young, consulting firms told her “they had more important clients to work with,” and plenty more.
So what did the journey look like, creating a hedge fund out of undergrad that now holds $7 billion and now working on her second start-up? You can read her story here. 🌟
You can also reach her on Twitter! She’s happy to answer questions there (check her thread on why she openly dislikes Forbes 30 Under 30 and the Thiel Fellowship).
💊 Alex Rothberg, CTO and Co-founder of Intus Care, talked adversaries concerning managing people
Being an entrepreneur in or right out of undergrad is a huge shift. You’re no longer a student but a manager. Alex, who hasn’t actually graduated from Brown quite yet, manages a team of computer engineers to build Intus Care’s complex system for the PACE healthcare industry.
He dedicates it all to 3 commitments: honesty, trust, and mission driven. Read more about it here! 🌟
Reach out to Alex on LinkedIn.
💅 Julia Xu, Founder of Multitasky, on why she won’t take on VC Funding
Multitasky is only a year old but has grown as an incredible rate; the value prop is as clear as daylight. Yet Julia chooses not to take on VC funding for 2 main reasons 🌟:
E-Commerce isn’t the right model to grow at the pace a VC firm expects. Julia says she’s seen too many e-commerce startups take funding only to die.
Multitasky truly is a passion project for Julia. She has no intention to rapidly grow it for a VC-desired exit and wants to maintain ownership over the company.
Connect with her on LinkedIn, and again Brown students: she’s incredibly friendly and will always be open to chatting!
💡 Valentin Perez, Founder of Studio (formerly Monthly), on becoming an entrepreneur
Valentin spent his first year after undergrad with his co-founder pivoting from idea to idea, before landing on Studio (formerly Monthly). His 3 tips to undergrads, in any business setting but also specifically to create something new:
Entrepreneurship is like working out a muscle, you gotta keep practicing.
Maintain your individualized self throughout the whole process.
The power of a cold email can go incredibly far.
Look out for next week’s W3W on “What are NFTs??” and another round of VWV Words of the Week.
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Thanks for tuning in, see y’all next time <3
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