How Advice From Vcs Really Means “You Might Fit Our Investment Model Better”

When a venture capital investor or investor pitch coach gives you advice on your business strategy, here’s how practical founders should hear it:

“Your company would fit our very specific investment criteria better if you did it like that.”

Most founders don’t hear it this way, but it’s what investors really mean when they give you advice in the hopes of one day investing in your company.

That’s all it is.

“You would have a better chance, but no guarantee, of getting an investment from us if your business looked like this.”

As a possibility to consider, not a recommendation to follow.

It’s not necessarily any of these:

  • It would be better for you as a founder if you took our advice
  • It would be better for your customers…
  • It would be better for your employees …
  • It will increase your odds of success…
  • The founders will have better odds of winning their big prize…

Practical founders with growing businesses who aren’t raising money face this challenge every time they talk to investors.

The ones I advise ask me, “Should I do what he said?”

It’s very tempting to treat savvy investor advice as “The way it is done.”

But it’s only “One way to do it that fits the big investor business model.”

VC investors don’t like tech-enabled services, for example. These are often great businesses for founders, customers, and employees. They just aren’t great for most VC investors.

VCs give this advice to founders every day:

  • You have too much service in your business model
  • Your market is too small
  • Your growth rate isn’t big enough
  • You shouldn’t sell your company before you get really big
  • You should sell your company someday and not run it forever

It’s easy for serious founders to feel like they are doing something wrong when hearing this kind of advice.

But practical founders who are growing valuable SaaS or tech-enabled services companies eventually learn to hear it this way:

“We’re doing fine. VC investors should change THEIR business model if they want to partner with us. We’re calling the shots here.”

Big VC funding isn’t wrong or evil. It’s just a very specific investment approach for a very specific kind of software company that wants to play that specific game.

10%-20% of all software companies get VC investment. And it doesn’t work out for founders at least half the time.

It isn’t for all or most software companies. It’s just the ones we hear about.

The real game is making customers happy, growing revenues and managing expenses, growing employees, and changing some part of the world with your solution.

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