Entrepreneurs place bets every day.
But sometimes the odds are not what they seem.
Think of all the clapping for startups that raised big rounds of venture capital.
“Congratulations on your big VC funding. You’ve made it!”
Well, not exactly.
What if you learned that more than half of the founders who raised institutional capital didn’t walk away with anything in the end?
Zippo. Nada.
Sure, some startups keep growing and become worth billions. We hear about every one of those.
But most startups don’t make it to their next round of funding. They either fail outright or are sold for not much money.
We don’t hear about those.
We also don’t hear about the liquidating preferences that ensure investors get paid back first when a distressed company is sold off. These preferences squeeze out founders and prior investors.
On the Practical Founders Podcast this week, I talked with Dougal Cameron of Golden Section about the reality of these odds.
Dougal is a practical funder. He and his team are serious investors who take a different approach.
“So 66% of the time, venture-backed founders make nothing when their company sells. And that’s the companies that get to an exit. They make nothing when the company sells,” Dougal says.
“I think that’s a horrible statistic and it really reveals some of the problems in the venture capital industry, which aren’t necessarily the fault of any one actor. It’s just how the game was set up. And I think the VC game makes a lot of sense—if you’re targeting an unproven technology or an unproven approach.
“But the traditional VC game doesn’t make a ton of sense when you’re a founder that sees a problem that you know and you know people are going to buy. If you’re a B2B founder with domain expertise who has lived and breathed the problem. That’s where we focus and we take a different investing approach.”
This is the first Practical Founder Podcast where I interview an experienced “practical funder” about different approaches to traditional VC funding.
Practical funding approaches with better odds, better support, and better outcomes for practical founders who think that outside funding could help.
Traditional big VC funding isn’t bad or wrong. It’s just not useful for most founders in the end.
Check out my in-depth interview with practical investor Dougal Cameron on the Practical Founders Podcast.
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