Peter Kerr at Stick reports raising venture capital can hurt a new business. The title of his Should you bother with venture capital funding…the numbers suggest no says it all. He quotes one investor who points out there is an inverse correlation between the amount of venture capital invested and business success. In other words, the companies that raise the least amount of funds tend to do best.
Kerr lists five reasons why this happens. For me the first one is the killer:
Pandering to VCs is a distraction:
Raising capital demands a lot of time and energy, when an entrepreneur is better off convincing prospective customers to buy – or perhaps learning why they won’t.
And that’s my experience of raising money. Often it can take almost as much effort to raise a sum from investors as it can to earn the same amount as income.