How to Think About Venture Capital

To determine if you should pursue VC dollars to fund your company, you first need to understand how the venture capital model works. Heidi covers the type of businesses and growth potential required for a VC to make an investment, along with the high risk involved in venture capital and an explanation of the power law.

More Information: https://threshold.vc/podcast/how-to-think-about-venture-capital

Further Reading:

I promised a lot of additional reading – so here goes.

First off, understanding the VC power law is fundamental to understanding the VC business model. Here’s a post about it:  https://x.com/speechu/status/1083921878786310144  

And a whole book abot it: https://www.amazon.com/Power-Law-Venture-Capital-Disruption/dp/0241356520

The topic of whether venture capital is the right way to fund your business is critically important. Here’s a post by VC Erik Berg that nicely captures many of the key points to consider: https://abergseyeview.com/is-venture-capital-funding-right-for-my-busines  Here’s a fantastic article by the New York Times about why some entrepreneurs didn’t take VC:  https://www.nytimes.com/2019/01/11/technology/start-ups-rejecting-venture-capital.html

And here’s a post by entrepreneur Anthony Collias about the pros and cons of taking that venture investment given his experience as an entrepreneur: https://blog.joinodin.com/p/vc-steroids

A bit dramatic, but the gist of it isn’t wrong – The warning label that should come with VC money: https://hackernoon.com/the-warning-label-that-should-come-with-venture-capital-9432500b7195

And for those of you who like stats:

• Here are some interesting stats on startup financing from Fundera: https://www.fundera.com/resources/startup-funding-statistics
• A great infographic by Entreprener on where startup financing comes from:  https://www.entrepreneur.com/money-finance/where-startup-funding-really-comes-from-infographic/230011
• And venture investing data from Crunchbas: https://news.crunchbase.com/venture/global-funding-data-analysis-ai-eoy-2023/ 
• And more data from the National Venture Capital Association: https://nvca.org/wp-content/uploads/2024/05/2024-NVCA-Yearbook.pdf

As for startup failure rate,  there’s this piece from Harvard Law School: https://corpgov.law.harvard.edu/2023/09/29/startup-failure/

Here’s the story about the Wordle creator and his sale to the New York Times: https://corpgov.law.harvard.edu/2023/09/29/startup-failure/

The Benchmark/eBay story is summarized here:  https://medium.com/venture-capital-research/8-vc-insights-from-the-genesis-of-benchmark-capital-8915d4fe6f39

And last but not least, my Alec Baldwin quote comes from this famous scene in Glengarry Glen Ross:  https://www.youtube.com/watch?v=Q4PE2hSqVnk