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What does your VC have to do with your spouse?

Last week at Agile Entrepreneurs, an entrepreneur asked the inevitable question of valuation and equity you need to give up in return for VC funding. As the other entrepreneurs in the room chimed in with the expected answer, the analogy hit me.

Getting funding from a VC is like getting married. No matter who you marry, you give up 50%. And while every man dreams of marrying a hot bombshell, who he ends up with has a lot to do with who he is and how good he looks.

That pretty much sums up the terms you're likely to get from VCs:

The amount of equity you need to give up is fairly constant, irrespective of the amount of money you raise. And the amount of money you're able to raise depends on your leverage.


Moral: Focus on making yourself (and your company) more attractive, i.e. building value. There's not much else you control when in comes to negotiating with VCs.

Comments

  1. Fairly good analogy. I totally concur with your view that before trying to raise VC money you must generate some value for your company, be it monetary or goodwill, may be in that order.

    Abhishek

    ReplyDelete

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