Is the Venture Capital model outdated and too expensive for startups?

Not remotely.

I think too many have been misled to believe that everyone can be an entrepreneur and that raising capital is just a step in the process.

Venture Capital’s model is the same as it ever was, and just as important, if not more so, as the rate of entrepreneurs (many of whom will have valid opportunities) is seemingly going up.

Three keys to VC:

  1. You must exit
  2. You must be able to compete capably enough to enable a value roughly 15x what they invest.
  3. You must have a capable team.

Believe it not, it’s really that simple. Thing is, everyone who isn’t really committed to that, is led to believe they too should get investment! After all, they’re profitable!!

Profitability is for loans.

Most founders cringe at the idea of replacing themselves. Most founders want to retain too much and not invest in that team. Most founders don’t figure out what it takes to exit. Most founders don’t prioritize marketing so they can figure out how to compete and thrive, it’s an afterthought to get Sales.

And for those reasons, such founders just aren’t fundable.

There is no ill intent nor outdated model. VCs aren’t trying to get too much and take advantage of entrepreneurs.

It is what it is. Right for some. Not for most.

Things to keep in mind is that VC refers to a Fund managed by Partners. Those Partners are sort of in your shoes too… their job is to raise money. VCs aren’t Angels nor business investors… given their role, they must have exits in the businesses they fund. They have to get more money back! That’s the way it works (and is supposed to work).

It’s completely okay if that’s not right for you.

Most businesses are not fundable by venture capital. Notice that most businesses aren’t funded by venture capital.

That’s not because it’s wrong, it’s because that’s not where venture capital applies.