THE MONEY AIN’T FOR NOTHIN…

Relatives and friends will often give you money for your new business — whether a loan, investment, or even a gift — for a variety of motivations from belief, to support, to responsibility, to guilt, and more. You hope to eventually give them their money back, plus a return, but both sides generally know that money may never come home.

Banks will loan you money as a means of making a set return or interest rate. There’s little to no emotion involved and there are ramifications if the bank doesn’t get their money back. Again, it’s not personal, just business.

Early-stage venture is a blend of the two. For almost all VCs it is personal, they want to support great entrepreneurs and big visions. And, it’s also business. While they accept that individual bad outcomes are inevitable, the fund exists to make money. They want rapid growth/ scale, additional capitalization to sustain said growth, and an exit within 5–10 years. The entrepreneur and VCs interests are directionally aligned, but those paths can diverge if the entrepreneur becomes the impediment, significant additional capital/dilution is required, things are taking many years longer than anticipated, and many other scenarios.

Accordingly, founders ask all the time regarding what type/class of investor they should raise from. Here’s a visualization to help you to begin to think through it. You may not have all the answers yet. But, it’s important to be aware of the relevant questions and to be honest with yourself about the answers. The acceptable risk tolerance, work-life balance, degree of responsibility, notoriety, loss of privacy, etc. is solely yours to define…

Questions to ask yourself:

  • How much $ do you need to achieve planned company milestones for the next 12–18 months?

Be careful what you wish for, because you just might get it!

*of course there are exceptions*

TIA Ventures | Randy Brandoff

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TIA Ventures is a seed-stage venture capital fund that partners with companies building emotional and visceral connections with their consumers.

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TIA Ventures

TIA Ventures is a seed-stage venture capital fund that partners with companies building emotional and visceral connections with their consumers.