Comment by zkhalique | Hacker News Reader

Comment by zkhalique | Hacker News Reader

I have a question about raising VC money earlier. If you want to grow fast and push some free platform out to change the world, what is main danger in raising VC? I'm talking about the VCs these days who invest in companies that make open source like NGiNX, MySQL etc. And you need resources to grow, if you want to beat competitor platforms.

I mean logically, if they've already given you the money and there isn't any way they can take over governance of the company, then the only leverage I can think of is signaling in future rounds. And if you weren't even going to raise one VC round, then at that point you may as well raise exactly one and then signaling is irrelevant. Yes you've diluted yourself 20% and now you've got a board member that wants you to grow fast, but so do you. Of course, I'm assuming here that you failed to raise on Kickstarter, and you aren't making enough $ to hire people to do development/testing/security/evangelism/PR/marketing/operations/etc. anytime soon. Why waste years of your life when you can hand the project off eventually to a community you've built, and move on? If you want to retain control over the project forever, can always be BDFL of the community, at least until some better-funded company forks it. I just really want to understand, what is the reason that guys like DHH say VC can control you after you take their money?

Once you take money from investors, you have both a legal and a moral responsibility to them.

It's important to remember that selling equity is really selling something, just like selling a product. You can't sell something, take somebody's money, and then just not deliver. What you are selling to investors, generally, is return on investment.

The real problem comes in because founders and VCs have different understandings of "grow fast". There will come choices that have different levels of risk. VCs always want you to take the high-risk, high-reward path, because they have a portfolio company and are looking for the few really big winners. You, on the other hand, are trying to build something (team, community, product, etc), and so you will favor slower but safer growth.

I guess in theory you could sell VCs on a high-growth approach and then turn around and say, "Ha ha, fuck you, we're going to keep your money and try to grow modestly." But a) VCs are way better at their game than you are, so they're hard to fool, and b) then you're an asshole, which is bad on its own and also has consequences for future relationships (and future funding). Plus, if you're in a VC-fundable space, you'll probably have competitors who are also taking money, and they'll be able to outspend you on future rounds.

No, assuming you're not an asshole, just want to reduce risk or make your own decisions in good faith, how can they force you to make a decision you normally wouldn't make?

To get the money from VCs, one has to sell them on the notion that the company will to scale until it can swallow the moon. Suppose I take their money and say, "Sorry, now I want to reduce risk! Too bad, suckers!" I'd say that makes me an asshole.

If you've taken a small amount of their money, then maybe they can't legally force you to take more risk than you think is wise. (They can, however, make sure you're unlikely to get money from anybody else, either now or in the future.) But if you've taken a B round or more, then a founder probably doesn't have control.

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