From the course: Entrepreneurship Foundations

Taking venture capital

From the course: Entrepreneurship Foundations

Taking venture capital

- Venture capital has grown in popularity in the last decade fueled by the rise of entrepreneurs on screen through hit films like The Social Network, or a popular TV series like Shark Tank, and Dragon's Den. But Hollywood glamor doesn't equal reality. Let's dive into the myths of the VC world and break them down one by one. Myth number one. VC's are celebrities or household names like Jobs, Zuckerberg, or Branson. In reality most VCs you have never heard of. They are ex-entrepreneurs who may have had successful exits like the founders of Instagram selling to Facebook. Or they're successful individuals in the startup world, like being the fourth employee ever at Google. While they may not be household names, these individuals have a great eye for what businesses will need to grow. Myth number two. Taking VC money guarantees success. Mm, not quite. Think of it as getting to start a race a few steps ahead of your competitors. Doesn't mean you're going to win. But you do have a competitive advantage. Venture capital helps to accelerate a company by giving it two things, cash to grow the business, and most importantly a think tank of advisors who can give advice, and suggestions to help grow the business. Both are huge assets. Myth number three. VCs believe in my vision. In reality VCs want to make their money on their investment, and they're going to do whatever it takes to make that happen, even if it's not your vision. The more money you take the more equity you give up which lessens the control that you have. Steve Jobs was famously kicked out of his own company because he had given away too much equity and control. Now obviously that's a worst case scenario. While you won't necessarily lose control of your company by taking on venture capital, it is something to consider. If you're thinking venture capital is the right path for you I encourage you to consult advisors and legal teams so you are fully aware of the options and potential obstacles in front of you. To find a legal team in your area search the internet for startup legal attorneys, or early stage law firms. In addition to using the web I encourage you to utilize LinkedIn groups and ask other founders in your area who they recommend. Or just reach out on LinkedIn to a local entrepreneur who has raised funding and ask them for their best advice as different countries will have different laws and structures. Venture deals tend to be very complex and you never want to get caught in a situation that you weren't expecting. Or worse that you didn't understand. Take the time to research and study deal structures before you sign anything. While VC funding can be a fantastic path, it's one to take carefully, and with lots of outside counsel and advice.

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