I’ve taken a class on new venture funding and what this article misses out on is a discussion of the term sheet.
VC can be a great deal for the company and the founder, or it can be a really bad one. That often depends on what ends up being negotiated into the term sheet that is signed by the VC and founders: what’s the pre-money valuation, what’s the liquidation preference, etc etc.
Basically, this article says “don’t buy a cheeseburger, it’s a bad deal” without having a discussion about how much the cheeseburger cost.
VC can be a great deal for the company and the founder, or it can be a really bad one. That often depends on what ends up being negotiated into the term sheet that is signed by the VC and founders: what’s the pre-money valuation, what’s the liquidation preference, etc etc.
Basically, this article says “don’t buy a cheeseburger, it’s a bad deal” without having a discussion about how much the cheeseburger cost.