Companies that would do best without venture capital
6.6 Key Insight: Venture capital is designed for a tiny fraction of businesses that can achieve explosive growth with outrageous margins, and most founders would be better served by alternatives like bootstrapping, angel investment, or revenue-based lending.
Dan Shapiro explains why most businesses—using a taxi company as a concrete example—are fundamentally unsuitable for venture capital funding. Prompted by an email from a Boston taxi operator seeking VC, he lays out six reasons: VCs want explosive growth over profitability, demand outrageous margins, need 10x returns, prefer investing in elite insiders, require months of full-time fundraising with low success rates, and impose board oversight that limits founder autonomy. He then outlines alternatives including angel investors, bank loans, revenue-based financing, and bootstrapping, while acknowledging that VC is genuinely powerful for the rare company that fits the model.
7 VCs don't actually like their companies to be profitable. Someday, sure, but not on their watch.
7 When the day comes that a VC-backed business generates cash faster than it can effectively spend it? They sell the company, or IPO, or replace the CEO with someone who can spend fa…
7 VCs don't like reasonable margins. They are exclusively interested in outrageous margins. Ludicrous margins. We're talking about sneering at 50%, and hoping for 80%, 90%, crazy ast…
Entrepreneurship