How Not to Get Screwed by VCs | Hacker News Reader

How Not to Get Screwed by VCs

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12 pointssant0sk111 comments

Easiest way to avoid getting fucked by VCs, don't use them. Bootstrap and work your ass off.

Depends on the business. Most companies don't need or qualify for venture money and believe they need it because of what they read on teh blogz. Building a high growth 10x return potential 9 figure company doesn't come easy.

Pretty sure Loopt bootstrapped to start and worked their ass off. I'm also pretty sure, they couldn't do what they need to do without $13.3m or so in funding. Having sequoia and NEA also helps a lot beyond the dollars. The value add from those VCs is significant, not bullshit by any means.

Having sequoia and NEA also helps a lot beyond the dollars.

How do they help beyond the dollars? I did two startups backed by Sequoia and they didn't provide any help besides the money.

They will almost always help if they've invested in you by giving you access to their rolodex or providing direct advice. Even angels who don't get a board seat will want to help you if they've invested in you. If they aren't helping you, that typically means they think you're doing a bad job or that they know you're doomed already. And usually it does take some work on the founder's part to actually ask for the help.

Mobile network operators are notorious for being conservative and extremely difficult to work with. If your business depends on their cooperation, you need all the help you can get. It might not help in every case, but in that example I strongly suspect that they'd be having a hard time to get the carriers to even listen to them without VC backing, never mind doing a deal.

Hold on to as much equity as you possibly can.

First time entrepreneurs usually confuse equity with control, there can be dozens of mechanisms, by which VC's can gain control of a company they invested in.

A few examples:

* Controlling all C-level positions, firing you at will (which will affect your vesting schedule) * Controlling spending which will force you to raise further rounds, further dilluting you * Board seats * Veto power for exits

Get a lawyer and read everything a dozen times...

Don't use them.

This isn't Reddit; please don't write comments like that. If you're going to write a one liner please try to at least find something cleverly amusing rather than obvious and tired.

Some ventures will do better with venture backing, in fact, that's covered in the article, and there are some reasonable gotchas in the article. Your comment, on the other hand, adds nothing.

aka be diplomatic

Or better still, actually say something useful.

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